Zeng and Ors and Minister for Immigration and Citizenship

[2008] AATA 648

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 648

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/2456

GENERAL ADMINISTRATIVE DIVISION		)               2007/2457                 2007/2458                 2007/2459
Re		TIANRAN ZENG; BIFEI FANG; ZHIYING ZENG; and FANGYING ZENG

Applicants

And MINISTER FOR IMMIGRATION AND CITIZENSHIP

Respondent

DECISION

Tribunal Senior Member, Mrs Josephine Kelly

Date25 July 2008

PlaceSydney

Decision The reviewable decisions in proceedings 2007/2456, 2007/2457, 2007/2458 and 2007/2459 are affirmed.

....................[sgd].....................

Senior Member
  Mrs Josephine Kelly

CATCHWORDS

MIGRATION – Business skills visa – Cancellation –  Shares in eligible business – Import and export of clothing goods from China - Whether substantial ownership interest in eligible business – Whether utilising skills in actively participating at a senior level in the day to day management of business – Whether genuine effort – Held grounds for cancellation – No duty not cancel – Residual discretion not exercised – Reviewable decisions affirmed

Migration Act 1958, s 134

Kim v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 38 AAR 304

Shi v Migration Agents Registration Authority (2007) 158 FCR 525

Departmental Procedures Advice Manual 3: Visa cancellation – Business Visas (PAM)

REASONS FOR DECISION

25 July 2008 Senior Member, Mrs Josephine Kelly     

1.      Mr Tianran Zeng, his wife Ms Bifei Fang, and his son and daughter Zhiying and Fangying Zeng, appeal from a decision of a delegate of the Minister for Immigration and Citizenship to cancel their business skills visas on 14 May 2007.   

THE ISSUES

2.      There was no issue in relation to the notice requirements of the Migration Act 1958 (the Act) having been met. The issues arise from the provisions of s 134 of the Act.

3. It was agreed by the parties at the beginning of the hearing that the company, Olym Pty Ltd (Olym) is an eligible business within the meaning of s 134(10) of the Act.

4.      There was also no dispute that the date of cancellation is the relevant date when the statutory criteria had to be satisfied, although evidence arising after that date may be relevant insofar as it bears on the merits of the original decision as at the time the decision was made: Shi v Migration Agents Registration Authority (2007) 158 FCR 525 at 532 (per Nicholson J, Tracey agreeing).

5. Section 134(1) of the Act sets out three criteria. If the Minister is satisfied that any one is not met, he may cancel the business visa. Accordingly, the first set of issues is whether Mr Zeng:

a) had obtained the substantial ownership interest in Olym required by s 134(1)(a) of the Act;

b) was utilising his skills in actively participating at a senior level in the day-to-day management of that business (s 134(1)(b) of the Act); or

c) intended to continue to hold the relevant ownership, and actively participate at a senior level in the day-to-day management of that business (s 134(1)(c) of the Act);

6. If I am satisfied Mr Zeng does not meet one or more of the provisions of s 134(1), the next question is whether I am is satisfied that Mr Zeng meets all of the requirements set out in s 134(2), in which case the visa must not be cancelled. In this case, I must consider whether Mr Zeng has:

(d) made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia ( s 134(2)(a)of the Act); and

(e) made a genuine effort to utilise his skills in actively participating at a senior level in the day-to-day management of Olym (s 134(2)(b) of the Act); and

(f)  did he intend to continue to make such genuine efforts (s 134(2)(c) of the Act).

7. Mr Karp, who appeared for Mr Zeng and his family members, did not rely on s 134(5) of the Act in relation to Mr Zeng's wife and children, that is, that cancellation of their visas (the secondary visas) would result in extreme hardship to them. There was no evidence of hardship that would be suffered. Accordingly, the fate of their applications for review depends on that of Mr Zeng's application.

5. Mr Karp did not refer to the residual discretion in s 134, which was discussed by Kiefel J in Kim v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 38 AAR 304. However, I will address it. 

LEGISLATION

8. In addition to sub-sections 134 (1) and (2) of the Act, which have been summarised above, s 134(3) of the Act provides a non-exhaustive list of matters that I may take into account when determining whether a person has made the genuine efforts described in subsection 134(2). Section 134 (3) of the Act provides:

(3)  Without limiting the generality of matters that the Minister may take into account in determining whether a person has made the genuine effort referred to in subsection (2), the Minister may take into account any or all of the following matters:

(a)  business proposals that the person has developed;

(b)  the existence of partners or joint venturers for the business proposals;

(c)  research that the person has undertaken into the conduct of an eligible business in Australia;

(d)  the period or periods during which the person has been present in Australia;

(e)  the value of assets transferred to Australia by the person for use in obtaining an interest in an eligible business;

(f)  the value of ownership interest in eligible businesses in Australia that are, or have been, held by the person;

(g)  business activity that is, or has been, undertaken by the person;

(h)  whether the person has failed to comply with a notice under section 137;

(i)  if the person no longer holds a substantial ownership interest in a particular business or no longer utilises his or her skills in actively participating at a senior level of a day-to-day management of a business:

(i)  the length of time that the person held the ownership interest or participated in the management (as the case requires); and

(ii)  the reasons why the person no longer holds the interest or participates in the management (as the case requires).

9.      A Departmental Procedures Advice Manual 3: Visa cancellation – Business Visas (PAM) is also relevant and was referred to by Ms Nandagopal, who appeared for the Minister.

THE CASE FOR MR ZENG AND HIS FAMILY

10.     The case for Mr Zeng before me relied on his purchase of 6 of 40 issued shares in Olym Pty Ltd (ACN 063 712 587) (Olym) for AUD$150,000.  The tax returns for the 2005 and 2006 tax years were relied on to show that Olym earned AUD$1,919,146 in the 2005 tax year and had a taxable income of AUD$105,611.  In the 2006 tax year, the figures were AUD$2,031.710 and AUD$69,966 respectively.  As of 30 June 2005, Olym's total assets were AUD$467,458.40 and as of 30 June 2006, AUD$536,203.05.

11.     Olym trades under a number of names.  It imports shoes and clothes from China and sells them in a number of stores which it owns, mainly in Victoria.  Olym has 33 employees, all of whom are Australian citizens.

12.     Mr Zeng's duties with Olym are purchasing, negotiating with suppliers, and following up orders, in China.  He spends approximately 22 hours per week doing that work. He has one contact for clothes and two contacts for shoes in Guanghzhou, the name, address and telephone numbers of which were supplied.   Mr Zeng's case emphasised the importance of personal relationships when doing business in China.

13.     Examples of orders signed by Mr Zeng, and two receipts issued to him with translations, were provided to the Tribunal.  Mr Zeng and Mr Weinan Li, a director,  company Secretary and a shareholder in Olym, gave evidence before the Tribunal.

CONSIDERATION

14.     Mr Zeng, his wife and two children applied for a Subclass 127 business Owner Visa in February 2003.   Mr Zeng provided information in the Business skills profile:  Business owner (Form 1136) about his business in China, in which he had had been involved since 1981.  It was a property development company with net assets of AUD$1,490,004 in 1999 and AUD$1,818,007 in 2000, and turnover of AUD$5,400,101 and AUD$5,818,549 in each of those years respectively.  It was based in Zhang Zhou City.  Mr Zeng held a 95% interest in the business. He indicated in the form that he planned to invest AUD$1,600,000 in a property development and import export business in Australia. He notified the relevant business development agency in New South Wales that he intended going into business there.

15.     Amendments to the Form 1136 were provided in May 2003.  Relevantly, the business had suffered a loss of AUD$48,002 in 2002.   It was also disclosed that Mr Zeng and his wife owned other businesses and had assets in those businesses but were not claiming in relation to them as audited financial statements had not been prepared "for those other companies". It was also disclosed that Mr Zeng held 75% in the property development business, his wife 20% and a child held 5%, that is, 100% of the business was held by Mr Zeng’s family members.   A significant new matter that was disclosed was that the value of total net assets available for transfer to Australia in 2 years was AUD$6,479,366.

16.     A Survey of Business Skills Migrant – 24-months dated 4 April 2006 was sent to Mr Zeng's migration agent, who sought extensions of time within which to reply on two occasions.  The first was sought because Mr Zeng:

is still negotiating with a real estate company in Sydney about investment and cooperation.

The second request said that Mr Zeng:

is still negotiation with his potential partners for the purchase of a 10% equity share in Asset Credential Mortgages and Asset Credential Realty.

17.     The migration agent sent in the response under cover of a letter dated 23 July 2006.  It advised that Mr Zeng was not currently engaged in business in Australia, that he had transferred $40,000 to Australia, indicated that he would like to engage in real estate development but that there had been a downturn in the past two years, and that he was negotiating to purchase company shares from a real estate and mortgage company in Sydney.  It was also stated in the form: "I also intend to engage trading of wool and mineral products".   Mr Zeng indicated that he was still engaged in his property development business in China.

18.     A Westpac document shows that $40,000 was on deposit in the name of Mr Zeng's daughter from 11 January 2005, with a maturity date of 11 August 2005.   Mr Zeng's daughter was born on 5 August 1980.

19.     A Business Proposal for Mr Zeng's purchase of a 10% equity share in Asset Credential Mortgages and Asset Credential Realty was provided to the Department of Immigration & Citizenship (DIAC)  on 23 July 2006 by Mr Zeng's migration agent.  There is also a document on "ACM" letterhead which has no date by which to identify when it was prepared, but which refers to Mr Zeng's being entitled to a dividend from net profit for his shares, and stating that Mr Zeng:

must be involved in matters of Asset Credential Realty's administration & commitment, meeting & agenda. and make positive inputs & efforts into our company growth and administration both from Australia & China [sic]. 

20.     The same document also refers to the sale of properties in China, and the calculation of Mr Zeng's commission from such sales.

21.     Ourye International Trading Pty Ltd (ACN 118 655 879) (Ourye) was registered on 6 March 2006, that is, before the 24 month survey was sent out.  The Memorandum of Association was in evidence.  Mr Zeng, his wife and daughter were directors of the company.

22.     The notices of intention to cancel Mr Zeng's visa and his daughter's visa were sent to the migration agent on 8 February 2007.   A response, in English, dated 5 March 2007, and signed by Mr Zeng in Chinese, was sent to DIAC.   It stated, in part:

I am sorry that in 24-month survey I didn't tell my representative regarding some business activities that I was doing and the relevant evidences [sic]..

23.      The document proceeded to provide information about his activities with Montana Pacific Corporation Pty Ltd Australia (Montana), which involved his carrying out feasibility studies and project reports and to negotiate with relevant departments for major projects at Shengyang and other cities in China.   Mr Zeng referred to a project in which Montana, two other companies and his company, Ourye, were going to invest.  The project was worth approximately AUD$1 billion over a total area of 2000,000 m2.

24.     Mr Zeng also referred to having transferred approximately AUD$290,000 to Australia, and also having found a grocery store business when in Melbourne in which he purchased 15% of the company shares.  His major responsibility was to purchase and negotiate with suppliers from China.

25.     Further documents were provided in support of this information.  There was material relating to his association with Montana.   There was a document entitled "Confirmation of Foreign Exchange Transaction" which indicated that Mr Zeng had transferred AUD$65,146.58 into a Westpac bank account, in the name of Ourye, on 14 March 2007.  Another document, which probably refers to that transaction, shows that it is a Business Internet account.

26.     There was also a Term Deposit Confirmation Advice dated 23 February 2007 showing a deposit of AUD$140,210.16 in Mr Zeng's name with the Westpac bank with a maturity date of 30 August 2007.

27.     DIAC records show that Mr Zeng  spent 21 days in Australia between 14 May 2002 and 14 May 2007.  Those records show that Mr Zeng arrived in Australia on 21 February 2007 and departed on 26 February 2007. 

28.     Mr Zeng's evidence was clear that he lives and works in China.  At the time of the hearing he was "living" in a hotel in Sydney.   Mr Zeng said that Olym has no office in China.  He gave evidence about his visits to the clothing and shoe factories in China to check the quality of the goods manufactured.   

29.     Mr Zeng said that he kept diary notes of his business activities. Copies of the diary notes written in Chinese, and translations were in evidence.

30.     Olym has been registered and operating since 1994.  There are 40 ordinary $1 shares issued.  Mr Li and his wife are the directors in the company, and each holds 17 shares, that is a total of 34 shares. Mr Zeng holds 6 shares.    The change to the company registration details, when Mr Zeng became a shareholder, was certified by Mr Li on 1 March 2007. 

31.     According to Mr Zeng and Mr Li, they met in mid 2006 when Mr Li was translating for a friend.   They started discussing Mr Zeng's joining Mr Li's business later in 2006, and signed a contract dated 22 February 2007, when Mr Li said he was in China.

32.     In a document signed and dated 2 March 2008, Mr Li stated that Mr Zeng had visited "my company and our stores in February 2007".  He said that Mr Zeng's investment in Olym  was by payment "as long term deposit" for Olym, on 23 and 24 February 2007 to suppliers in China of 918,000 yuan, which is equal to AUD$150,000.   

33.     Mr Li gave evidence, by videolink from Melbourne.  He said that  his business, Olym, started off as a manufacturer, and began importing in small quantities in 1995.  In recent years they have imported more.  Before Mr Zeng joined Olym, Mr Li and his wife would frequently go to China to negotiate with suppliers.   They would go to factories or show rooms and choose the styles they wanted.  The manufacturer would make a sample, and, if approved, production would occur.  After production, quality had to be checked and then the items were shipped.   He said that quality was a headache and they had stock that they had to sell at sales or give to the Salvation Army. 

34.     Mr Li said that in July/August 2006 they had six retail stores.  China suppliers were saying that they were too small.  Mr Li and his wife were concerned about the quality of goods and also needed to open more shops and increase financial support.  They considered that they needed partners in China who would be responsible for quality control. 

35.     Mr Li said that he and his wife place orders from Australia.  They specify the designs and colours.  Mr Zeng organises suppliers to make the orders, negotiate price and production time, and then check quality and arrange shipment.  Payment is made by Olym directly from Australia to the factory.  I found this aspect of Mr Li's evidence confusing – I was not sure whether payment was made after manufacture of a sample or after production of the whole order.   He seemed to say that payment had to be made before manufacture, because of the small size of the orders, but then said that it was made after Mr Zeng had checked the quality.   

36.     An added complication was the evidence of Mr Zeng's payment of AUD$150,000 to suppliers in China on 24 February 2007 as "long term deposit" for Olym.    There were two receipts in evidence, together with translations, from Guang Zhou Zhi Mei Shoes to Mr Zeng, both dated 24 February 2007, for a total of 918,000 Yuan.  The receipts had no physical address for that entity, only telephone and facsimile numbers and email addresses.  These payments would have occurred while Mr Zeng was in Australia.

37.     Mr Li said that Mr Zeng will be paid 15% of the profits, but had not been paid because the accountant was still doing the accounts.  He and his wife feel that the quality of the goods is much better and they are not so worried about it and do not have to spend a lot of time in China.  They have more time for their retail activity in Australia.  

38.     During cross-examination Mr Li said that he and his wife began the business and put a lot of effort into it.  They make the major decisions. 

CONCLUSION

Grounds for cancellation

39. Having considered all of the evidence, I find that Mr Zeng did not have a substantial ownership interest in an eligible business in Australia, that is in Olym, at the date of cancellation, 14 May 2007, as required by s 134(1)(a) of the Act. The ASIC registration shows that there are 40 $1 fully paid shares of which he holds six.  I am not persuaded that Mr Zeng paid AUD$150,000 to suppliers in China. 

40.     I infer on the evidence that it was only when the Notices of Intention to Cancel the visa were issued on 8 February 2007, that Mr Zeng acted to increase his business activity in Australia. He visited Australia later in February 2007.  It was during that time that the agreement with Mr Li was made.  Around this time, as well as meeting with Mr Li there is also the deposit of AUD$140,000 into an Australian term deposit bank account in Mr Zeng's name and the deposit of $65,146.58 in a Westpac account in the name of Ourye. There was no evidence as to why the accounts were opened. No connection was sought to be made between the $140,000 deposit and the payment of $150,000 to suppliers in China.   

41.     There was conflicting evidence from Mr Li that suppliers were paid directly from Australia.   The receipts in evidence said to be for Mr Zeng’s payment of suppliers in China of AUD$150,000 were from Guang Zhou Zhi Mei Shoes, whereas in the Applicant’s statement of facts and contentions it was contended that Mr Zeng's contacts for shoes were two other suppliers, for which telephone numbers and a physical address were given. There were also documents, partly in Chinese and partly in English, which were said to have been orders signed by Mr Zeng with Guang Zhou Zhi Mei Shoes.  Those orders were dated, as far as I can work out, in July 2007.  There were no translations provided.  

42.     Five invoices to Olym during the period 30 March to 20 June 2007 were in evidence, for garments and some shoes and "insoles".  Four were in $USD and totalled USD$9,734.50. One was in Australian dollars for AUD$6,540. That is a total figure of no more than $AUD25,000.  If that figure is taken as an average value of goods imported for three months and, even assuming that there is an equivalent expenditure in each three months of the year, a year's total expenditure would be $AUD100,000.   If Mr Zeng did make a  payment of  $150,000 in advance to supplies, that would have been for 18 months' worth of supplies.   Given the concerns Mr Li expressed about the quality of production in China, and the need to check production before shipment, I do not accept that Mr Zeng did pay suppliers effectively in advance in the amount of $150,000.  I find that the goods are paid for either after a sample has been produced and approved, or after the order has been fulfilled, not months in advance of production.    

43. Although it is necessary to find only one criterion in s134(1) is satisfied to cancel a visa, I proceed to consider the others.

44. I also I do not consider that Mr Zeng is utilising his skills in actively participating at a senior level in the day-to-day management of the Olym as required by s 134(1)(b) of the Act. There was no evidence that Mr Zeng is involved in making the critical decisions such as the market to be targeted, which designs are to be manufactured, how many of each design is to be manufactured, the budget for production, or when and where to open new stores. Mr Li and his wife make those decisions. Further, there is no evidence that Mr Zeng has the expertise to make such decisions. On the evidence, he has expertise in property development.

45.     I  do not accept that he has devoted 22 hours per week to the work for Olym.  Mr Zeng’s diary notes, of which translations were tendered, include many entries simply stating what will be done on other days in the future.  It does not amount to a great deal of activity and supports my conclusion that he was not involved at a senior level in the day-to-day management. The orders and invoices tendered do not substantiate those diary notes.     

46. Given those findings, Mr Zeng's intention as described in s 134(1)(c) does arise for consideration.

No duty not to cancel

47. On the evidence, I conclude that Mr Zeng's focus, since his application for his visa, has been on his very profitable land development business in China. He and his family live in China. Since he made his application in 2003, Mr Zeng has made various token efforts to meet the requirements of the visa. Those efforts have been set out earlier in this decision. More significant efforts were made after the notice of intention to cancel and after the cancellation. I am not persuaded these efforts have been genuine as required by s 134(2) of the Act.

48. In relation to s 134(2)(a) of the Act, Mr Zeng's intention when he applied for his visa was to carry out a property development business or import / export. In May 2003 he was asserting that he would have $6,479.366 total net assets for transfer to Australia within two years. He registered an Australian company, Ourye, but did nothing further in relation to that company, except for an internet bank deposit in March 2007 after the notice of intention to cancel the visa. He apparently made some effort to invest in an Australian real estate and mortgage company which came to nothing. There was no evidence that at the time of the hearing that any of the monies placed in bank accounts in Australia were still in those accounts. I am not satisfied that Mr Zeng has made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia, including in Olym.

49. It is unnecessary to go further in relation to s 134(2) of the Act, however, I think it is appropriate to consider the balance of the provision.

50. In relation to s 134(2)(b) of the Act, I am not satisfied that Mr Zeng has made a genuine effort to utilise his skills in actively participating at a senior level in the day-to-day management of Olym or that he intends to continue to make such genuine efforts. The discussion above in relation to s 134(1)(b) is also relevant to this conclusion.

51.     Mr Zeng's evidence was that he is still involved in his property development business in China, although he said that he was winding down. He has 16 employees.  He said that he has managers and he does not have to be so closely involved.  He earns about AUD$400,000 a year from that business.  That business is clearly of much greater interest to him than is Olym.  He did not know the address of Olym in Melbourne and gave evidence he has never been there, which is contrary to Mr Li's evidence.  He did not know the trading names of the retail outlets or that one had closed down. He has received no payment for his activities for Olym.  He claimed he has spent 58 days in Australia since the visa was issued, when DIAC records indicate he has spent only 21 days in the country. 

52. Given my findings in relation to s 134(2)(a) and (b), it is unnecessary to consider s 134(2)(c).

Residual disrection  

53. Finally, although not relied upon, I consider the residual discretion in s 134(1) identified by Kiefel J in Kim at 310:

Whilst the discretion given in s 134(1) is not as broad as that considered in Samad, in the sense that it does not involve more choices, it cannot be said that a decision not to cancel a visa could serve no purpose.  The Minister might be satisfied of the matters referred to in subs (1) and not be satisfied as to the efforts made as referred to in subs (2) but nevertheless consider in a particular case that further time should be given to the visa holder to undertake what was required of them.

54.     There was no evidence before me which would persuade me to exercise the discretion in Mr Zeng's favour.

55. I have decided that the correct or preferable decision is that Mr Zeng’s visa should be cancelled. As I am not satisfied that cancellation of the visas of Mr Zeng's wife and children would result in extreme hardship within the meaning of s 134 (5) of the Act, their visas must also be cancelled (s 134(4)).

DECISION

56.     For the reasons stated above, the reviewable decisions in proceedings 2007/2456, 2007/2457, 2007/2458 and 2007/2459 are affirmed.

I certify that the 56 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member,
Mrs Josephine Kelly.

Signed: ……..[sgd]……….

Steven Mulipola, Associate

Date of hearing:  25 & 26 March 2008

Date of decision:  25 July 2008

Counsel for the Applicant:             Mr LJ Karp

Solicitors for the Respondent:      DLA Phillips Fox