Variagin (Migration)

[2023] AATA 3147

Variagin  (Migration) [2023] AATA 3147 (20 September 2023)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Mr Sergei Variagin
Miss Valeriia Variagina
Mr Vladislav Variagin
Mr Daniil Variagin
Miss Diana Variagina

REPRESENTATIVE:  Mr Christopher Levingston

CASE NUMBER:  2113172

HOME AFFAIRS REFERENCE(S): BCC2018/6149700 BCC2019/4721670 BCC2019/4721772

MEMBER:Peter Ranson

DATE:20 September 2023

PLACE OF DECISION:  Brisbane

DECISION:The Tribunal remits the applications for Business Innovation and Investment (Permanent) visas for reconsideration, with the direction the first named visa applicant meets the following criteria:

·cl.888.222 of Schedule 2 to the Regulations.

Statement made on 20 September 2023 at 10:52am

CATCHWORDS
MIGRATION – Business Skills (Permanent) (Class EC) visa – Subclass 888 (Business Innovation and Investment (Permanent)) – ownership interest in actively operating main business – direct and continuous involvement in day-to-day management – property development – time taken to find, purchase, design, gain approval, build and sell properties – applicant solely responsible for all business activities – decision made without hearing necessary – members of family unit – decision under review remitted

LEGISLATION
Migration Act 1958 (Cth), ss 65, 134(10), 360(2)(a)
Migration Regulations 1994 (Cth), rr 1.03, 1.11, 1.11A(1), Schedule 2, cls 888.222(1)(a), 888.311

CASES
Drake v MIEA (No 2) (1979) 2 ALD 634
Ibrahim v MIAC [2009] FCA 1328
Shahpari v MIBP [2016] FCCA 513

Any references appearing in square brackets indicate that information has been omitted from this decision pursuant to section 431 of the Migration Act 1958 and replaced with generic information which does not allow the identification of an applicant, or their relative or other dependants.

STATEMENT OF DECISION AND REASONS

APPLICATION FOR REVIEW

1. Mr Variagin and his family are from Russia. He is an engineer and applied his skills to property development in Australia through his own company. Property development can be a drawn-out process of finding sites suitable for development, obtaining the necessary approvals, arranging the works and then the sale hopefully at a profit. Small scale property development businesses generally only have one project on the go at any one time and given the process involved, each project can take years to complete. This is the case for Mr Variagin.

2. Mr Variagin and his family applied for their visas on 14 January 2019. The criteria for a Subclass 888 visa are set out in Part 888 of Schedule 2 to the Migration Regulations 1994. An applicant seeking to satisfy the primary criteria for the visa must satisfy the Common Criteria set out in Subdivision 888.21 and one of the stream specific criteria set out in subdivision 888.22 to 888.26. At least one member of the family unit must satisfy the primary criteria. In this case, Mr Variagin is seeking to satisfy the primary criteria for the grant of the visa in the Business Innovation stream.

3. Other members of the family unit who are applicants for the visa need only satisfy the secondary criteria set out in subdivision 888.3. The secondary applicants applied based on being members of the family unit of Mr Variagin.

4. A delegate of the Minister for Home Affairs was not satisfied Mr Variagin maintained direct and continuous involvement in the day-to-day management of the business which is necessary to satisfy the requirements of the main business definition, which is part of cl.888.222 of Schedule 2 to the Regulations. The delegate also found there was insufficient activity in the business for it to be a qualifying business. On 21 September 2021 the delegate refused to grant Business Skills (Permanent) Subclass 888 visas under s 65 of the Migration Act 1958 (Cth) on the basis the applicant did not.

5. The delegate found the secondary applicants could not be granted Subclass 888 visas, as they did not meet the primary criteria, nor did they meet the secondary visa criterion (cl.888.311) requiring them to be members of the family unit of a person who met the primary visa criteria.

6. The issue in this case is whether Mr Variagin’s property development business met the main business definition at the relevant times.

7. In accordance with s.360(2)(a) of the Act, and for the following reasons, the Tribunal considered it should decide the review in the Applicants’ favour based on the material before it. It was therefore unnecessary to invite the applicants to appear before the Tribunal.

8. For the following reasons, the Tribunal has concluded that the matter should be remitted for reconsideration.

CONSIDERATION OF CLAIMS AND EVIDENCE

A note about policy

1. Where a general policy exists to guide the decision maker in exercising its powers, the Tribunal ‘will ordinarily apply that policy in reviewing the decision, unless the policy is unlawful or unless its application tends to produce an unjust decision … cogent reasons will have to be shown against its application’.[1]

   [1] Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, 645 (Brennan J).

2. To the extent the Tribunal has considered policy in this case, it has not applied it inflexibly and has only considered it to the extent the policy is consistent with the requirements as set out in the legislation as it would be an error of law for the Tribunal to state it must (emphasis added) follow what policy says concerning the scope or meaning of a provision in the Act or Regulations.

Common criteria

1. The primary criteria for the grant of the visa, including the common criteria and the relevant stream specific criteria, must be satisfied at the time a decision is made on the application. The primary criteria for the grant of a Subclass 888 visa in the Business Innovation stream are in Subdivisions 888.21 and 888.22.

2. The issue in the present case is whether Mr Variagin maintained direct and continuous involvement in the day-to-day management of the business and otherwise satisfied the requirements for the property development business to be a main business, and if so, did he meet the remaining requirements of cl.888.222(1).

3. As Variagin started the business rather than purchasing it the Tribunal finds cl.888.222(2) does not apply in this case.

Ownership interest in main business

1. Clause 888.222(1) requires the applicant had an ownership interest in at least one actively operating main businesses in Australia during the two years immediately before the application was made and continues to have that interest. No more than two businesses can be nominated for this purpose.[2]

   [2] r.1.11(2)

2. Case law has established a business is not a legal entity but rather an enterprise or undertaking.[3] It is therefore important for the Tribunal to identify the business to which the definition of main business must be applied. It is also important to note that one business can be owned by multiple entities and conversely, multiple businesses can be owned by one entity.

   [3] Ibrahim v MIAC [2009] FCA 1328 at [30].

3. For the avoidance of doubt, an Australian Business Number attaches to an entity, not to a business, whereas the regulations for a Subclass 888 visa refer to a business not to an entity.

1. The business relied on by Mr Variagin to satisfy these requirements is property development, which is conducted by Fortune Build Pty. Ltd. ACN 613 874 981. Accordingly, the Tribunal must consider the nature of his interest in this business, whether the business was actively operating and whether it met the main business definition during the two years immediately before the application was made.[4] The Tribunal must also consider whether Mr Variagin continues to have the ownership interest in the actively operating main business.[5]

Does Mr Variagin have an ownership interest in the property development business?

[4] Clause 888.222(1)(a).

[5] Clause 888.222(1)(b)

1. An ‘ownership interest’, in relation to a business, means an interest in the business as:

   a.a shareholder in a company that carries on the business, or

   b.a partner in a partnership that carries on the business, or

   c.the sole proprietor of the business.

2. Ownership interest includes an interest held indirectly through one or more interposed companies, partnerships or trusts.[6] Ownership for this purpose includes beneficial ownership if it is evidenced in accordance with the terms of r.1.11A of the Regulations, set out in the attachment to this decision.[7]

   [6] r.1.03 of the Regulations and s.134(10) of the Act

   [7] r.1.11A(1)

3. To meet cl.888.222(1)(a) the Tribunal must be satisfied Mr Variagin had an interest of this kind in the property development business during the two years immediately before the application was made. To meet cl.888.222(1)(b) the Tribunal must be satisfied Mr Variagin continues to have the ownership interest in the actively operating main business.

4. Fortune Build Pty Ltd was registered on 26 July 2016 and Mr Variagin has been the sole director and shareholder since then. His submissions explain he started the business rather than purchasing an existing business.

5. Accordingly, the Tribunal is satisfied Mr Variagin did have and does have an ownership interest in the property development business at all relevant points in time.

Was each business relied on actively operating at all relevant times?

1. To meet cl.888.222(1)(a) the Tribunal must be satisfied the property development business was actively operating during the two years immediately before the application was made. To meet cl.888.222(1)(b) Mr Variagin must continue to have the ownership interest in the actively operating main business. This was the criterion on which the delegate refused the application.

2. The term ‘actively operating’ is not defined in the Act or Regulations. In considering whether this requirement is met, the Tribunal may consider whether the business exhibited activity of a ‘repetitive, continuous and permanent character’ at the relevant times, in which the business actively sought to generate business, in fact generated trade and custom and derived some financial gain for its activities in the relevant period.[8]

   [8] Shahpari v Minister for Border Protection [2016] FCCA 513 at [71]

3. At the request of the Tribunal, Mr Variagin provided a list of the projects the property development business had undertaken since it began. The list is reproduced below:

Site address	162 Como Parade West, Parkdale 3195	73 Lyrebird Drive, Carrum downs 3201	1/73 Lyrebird Drive, Carrum Downs 3201	2/73 Lyrebird Drive come, Carrum Downs 3201	15 Athol Court Langwarrin 3910
Purchase date	26 July 2016	4 July 2018	14 October 2021
Purchase price	$415,000	$627,000	$316,000
Construction commenced	15 June 2017	*Subdivided	10 October 2018	12 July 2019	Waiting for subdivision from the seller
Construction completed	22 May 2018	3 December 2019	3 February 2020
Sale date	2 June 2018	2 June 2020	24 June 2021
Sale price	$1,075,000	$450,000	$630,000

1. The delegate did not have the benefit of the information in the above table. Remembering the business is a small-scale property developer, the projects described above show the business was continuously active from at least July 2016 and each project can take years to finalise by the time the site is found and purchased, design is carried out, development approval is granted, building commences and finishes, and the developed property is sold. All projects are in Victoria, so the business is in Australia.

2. It is correct to say there are some Nil BASs since inception. That is to be expected given many months pass while activities occur elsewhere, for example, obtaining DA or settlement of the purchase or sale of a site.

3. As the table above shows, the property development business generated sales in June 2018, June 2020 and June 2021, which shows it derived some financial gain for its activities in the relevant period.

4. Accordingly, the Tribunal is satisfied the property development business was actively operating in Australia at all relevant points in time.

Does the property development business satisfy the main business definition?

1. To satisfy the requirements of cl.888.222(1)(a), the property development business must meet the main business definition during the two years immediately before the application was made. Clause 888.222(1)(b) requires Mr Variagin to continue to satisfy this requirement. The term main business is defined in r.1.11 of the Regulations. There are four elements to the definition, each of which must be satisfied for a business to be a main business.

2. Firstly, Mr Variagin must have or have had an ownership interest in the property development business. ‘Ownership interest’ is defined in s.134(10) of the Act.[9] If a beneficial interest is relied on for these purposes, certain evidentiary requirements must also be met.[10]

   [9] r.1.03

   [10] r.1.11A

3. Secondly, Mr Variagin must maintain or have maintained direct and continuous involvement in management of the business from day-to-day and in making decisions affecting the overall direction and performance of the business.

4. Thirdly, the value of Mr Variagin’s ownership interest, or the total value of the ownership interests of his and his spouse or de facto partner, in the property development business must meet certain thresholds:

   a.if the business is operated by a publicly listed company, the value of the ownership interest must be at least 10% of the total value of the business.

   b.if the business is not operated by a publicly listed company and the annual turnover of the business is at least A$400,000, the value of the ownership interest must be at least 30% of the total value of the business.

   c.If the business is not operated by a publicly listed company and the annual turnover of the business is less than A$400,000; the value of the ownership interest must be at least 51% of the total value of the business.

5. Finally, the property development business must be a qualifying business. ‘Qualifying business’ is defined as an enterprise operated for the purpose of making profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public and is not operated primarily or substantially for the purpose of speculative or passive investment.[11]

   [11] r.1.03

6. The Tribunal has already found Mr Variagin has held 100% of the shares in Fortune Build Pty Ltd, which owns and operates the property development business. Accordingly, the Tribunal is satisfied the first and third elements of the main business definition are met.

7. The submissions sent to the Tribunal reveal that Mr Variagin was solely responsible for all activities of the property development business. It was his role alone to seek out suitable sites for development and see the project through to completion including spending many hours on site supervising the works as evidenced by the photos provided in support of the application. Whilst at various times the business had arms’ length employees, they reported to him. Just because he engaged outside builders and contractors to complete some of the works does not mean he was not directly involved in the day-to-day management. Accordingly, the Tribunal is satisfied Mr Variagin maintained direct and continuous involvement in management of the business from day-to-day and in making decisions affecting the overall direction and performance of the business.

8. The Tribunal has already established the property development business bought property, developed it, and sold it to arms’ length buyers and made profits from those activities. The balance sheet of Fortune Build Pty. Ltd. contains no real property or investments, passive of otherwise. The assets and liabilities are those expected of a small-scale property developer. The Tribunal is satisfied the property development business is a qualifying business.

9. Accordingly, the Tribunal is satisfied the property development business meets the definition of main business at all relevant points in time.

CONCLUSION

1. Given the findings above, the Tribunal is satisfied cl.888.222 is met. The appropriate course is to remit the matter to the Minister to consider the remaining criteria for the visa.

2. The secondary visa Applicants are remitted for reconsideration by the Department based on the outcome of the application by the primary visa Applicant.

DECISION

The Tribunal remits the applications for Business Innovation and Investment (Permanent) visas for reconsideration, with the direction the first named visa applicant meets the following criteria:

· cl.888.222 of Schedule 2 to the Regulations.

Peter Ranson
Member