ZHANG and MINISTER FOR IMMIGRATION AND CITIZENSHIP

[2011] AATA 292

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 292

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  2010/1771

GENERAL ADMINISTRATIVE  DIVISION		)
Re		ZHANG, Zhonghua

Applicant

And MINISTER FOR IMMIGRATION AND CITIZENSHIP

Respondent

DECISION

Tribunal Mr Egon Fice, Senior Member

Date4 May 2011

PlaceMelbourne

Decision The Tribunal affirms the decision of the Minister dated 19 April 2010.

...........[sgd] Egon Fice....................

Senior Member

CITIZENSHIP AND IMMIGRATION – Business Skills Visa – Business Visa cancellation – genuine effort – substantial ownership interest – substantial shareholding – using skills to actively participate in management of business – participating at a senior level –eligible business – business proposal – development project  

Corporations Act 2001 (Cth)

Income Tax Assessment Act 1936 (Cth) ss 6(1), 51(1)

Local Government Act 1919 (NSW) s 118(1)

Migration Act 1958 (Cth) ss 134, 134(1), 134(2), 134(3), 134(8), 134(10)

Migration Regulations 1994 reg 1.11, 1.11A

Commissioner of Taxation of the Commonwealth of Australia v Murry (1998) 193 CLR 605

Ferguson v Federal Commissioner of Taxation (1979) 26 ALR 307

Hope v The Council of the City of Bathurst (1980) 144 CLR 1

Mersey Docks and Harbour Board v Henderson Bros (1888) 13 AC 595

Minister for Immigration and Citizenship v Hart (2009) 179 FCR 212 

Port of Brisbane Corporation v Deputy Commissioner of Taxation (2004) 81 ALD 549

The Shorter Oxford English Dictionary (3^rd ed, 1983) vol 1

REASONS FOR DECISION

4 May 2011  Mr Egon Fice, Senior Member    

1.     

Mr Zhonghua Zhang was granted a Business Skills Visa, sub-class 132, on

26 September 2006.  Included on that visa were Mr Zhang's wife, Xinmei Zhou, and his son, Lu Zhang.  Mr Zhang is a citizen of the People's Republic of China.  He first travelled to Australia on 25 December 2006, departing on 3 January 2007.  Since being granted his business visa, up to June 2010, he had spent a total of 37 days in Australia.

2.     

On 5 January 2009, the Department of Immigration and Citizenship (the Department) sent a letter to Mr Zhang via his authorised representatives in Australia, Australia Lawyers and Business Consulting (Mrs Zhu Hua Wu), as part of its

24 month survey of business skills migrants.  The purpose of the survey is to determine whether the visa holder is meeting visa requirements and, if not, whether there were grounds for a visa cancellation.  After obtaining an extension of time to provide the information, Mrs Wu wrote to the Department on 6 March 2009 enclosing the details of Mr Zhang's substantiation of his right to continue to hold the business visa.  On 23 December 2009 the Department sent to Mrs Wu notices that it intended to cancel the Business Skills visas held by Mr Zhang, his wife and his son. 

3. Section 134(1) of the Migration Act 1958 (the Act) sets out the grounds on which the Minister may cancel a Business Visa.  It provides:

134     Cancellation of business visas

(1)Subject to subsection (2) and to section 135, the Minister may cancel a business visa (other than an established business in Australia visa, an investment-linked visa or a family member’s visa), by written notice given to its holder, if the Minister is satisfied that its holder:

(a)has not obtained a substantial ownership interest in an eligible business in Australia; or

(b)is not utilising his or her skills in actively participating at a senior level in the day-to-day management of that business; or

(c)does not intend to continue to:

(i)hold a substantial ownership interest in; and

(ii)utilise his or her skills in actively participating at a senior level in the day-to-day management of; an eligible business in Australia.

4.     In a letter dated 19 April 2010 the Minister notified Mr Zhang's legal representatives that his Business Skills Visa had been cancelled.  By reason of s 134(4) of the Act, the business visas held by his wife and son were also taken to be cancelled.

5.     

Mr Zhang applied for a review of the Minister's decision by this Tribunal on

6 May 2010.  Therefore, according to s 134(8) of the Act, Mr Zhang's business visa is not taken to be cancelled until the 28^th day after the day on which the Tribunal hands down its decision, assuming of course that Mr Zhang’s application is not successful.

6.     The issues which I must determine are whether Mr Zhang:

(a)has obtained a substantial ownership interest in an eligible business in Australia; and

(b)has utilised his skills in actively participating at a senior level in the day-to-day management of that business.

7.If Mr Zhang does not satisfy (a) and (b) above, I must determine whether he:

(a)has made a genuine effort to satisfy (a) and (b) above; and

(b)intends to continue to make genuine efforts.

SUBSTANTIAL OWNERSHIP IN AN ELIGIBLE BUSINESS IN AUSTRALIA

8.     The expression eligible business is defined in s 134(10) of the Act in the following way:

(10)In this section:

…

eligible business means a business that the Minister reasonably believes is resulting or will result in one or more of the following:

(a)the development of business links with the international market;

(b)the creation or maintenance of employment in Australia;

(c)the export of Australian goods or services;

(d)the production of goods or the provision of services that would otherwise be imported into Australia;

(e)the introduction of new or improved technology to Australia;

(f)an increase in commercial activity and competitiveness within sectors of the Australian economy.

9.     While mindful that the meaning to be attributed to a word or expression can be affected by the context in which it is used (see Mersey Docks and Harbour Board v Henderson Bros (1888) 13 AC 595, at 599-600), to understand the expression eligible business, one first needs to understand the meaning of the word business as it is used in the Act. 

10.   The Full Court of the Federal Court in Ferguson v Federal Commissioner of Taxation (1979) 26 ALR 307 considered some of the factors which are relevant when considering whether a person is carrying on a business. It did so in the context of s 6(1) and s 51(1) of the Income Tax Assessment Act 1936.  Bowen CJ and Franki J summarised the effect of the authorities at that time, at 311:

… There are many elements to be considered. The nature of the activities, particularly whether they have the purpose of profit-making, may be important. However, an immediate purpose of profit-making in a particular income year does not appear to be essential. Certainly it may be held a person is carrying on business notwithstanding his profit is small or even where he is making a loss. Repetition and regularity of the activities is also important. However, every business has to begin, and even isolated activities may in the circumstances he held to be the commencement of carrying on business. Again, organization of activities in a business-like manner, the keeping of books, records and the use of system may all serve to indicate that a business is being carried on. The fact that, concurrently with the activities in question, the taxpayer carries on the practice of a profession or another business, does not preclude a finding that his additional activities constitute the carrying on of a business. The volume of his operations and the amount of capital employed by him may be significant.

11.   The approach suggested by the Federal Court is consistent with that adopted by the High Court in the well known case of Hope v The Council of the City of Bathurst (1980) 144 CLR 1. The High Court was considering whether the occupier of land was carrying on the business of grazing within the meaning of s 118(1) of the Local Government Act 1919 (NSW). Mason J, with whom Gibbs, Stephen, Murphy and Aickin JJ agreed, accepted that:

… “business” in the sub-section has the ordinary or popular meaning which it would be given in the expression “carrying on the business of grazing”. It denotes grazing activities undertaken as a commercial enterprise in the nature of a going concern, that is activities engaged in for the purpose of profit on a continuous and repetitive basis. …

12.   More recently, in the Commissioner of Taxation of the Commonwealth of Australia v Murry (1998) 193 CLR 605 the High Court determined whether the sale of shares and a taxi licence constituted the disposal of a business. The taxpayer contended that the shares and licence were the business. The Court, Gaudron, McHugh, Gummow and Hayne JJ said, at 626, in rejecting a statement made in evidence that the shares and license were regarded as a business:

… A business is not a thing or things. It is a course of conduct carried on for the purpose of profit and involves notions of continuity and repetition of actions.

13.     Therefore, in determining whether Mr Zhang has obtained a substantial ownership interest in an eligible business in Australia, I must first determine whether Mr Zhang has in fact obtained a substantial ownership interest, and if he has, whether the entity in which he has a substantial ownership interest is one which falls within the definition of eligible business in s 134(10) of the Act.

14.     Mr Zhang registered a company, World Town Group (Australia) Pty Ltd (World Town) on 20 June 2008.  On 1 October 2008 Mr Zhang, as a public officer of the company, registered its name in the Australian Business Register.  He registered the company for the goods and services tax and obtained a tax file number.  World Town obtained a licence to export wine, brandy and grape spirit on 13 November 2008.  The licence was valid for one year.

15.     On 24 October 2008 World Town purchased 550 dozen or 28 crates of Australian wine from Ocean Australia Pty Ltd, an unrelated entity.  That wine was sold to Zhejiang Huacheng Trading Co Ltd.  The wine was shipped to China in November 2008.  The value of the shipment invoiced to the receiver was $64,398.

16.     Mr Zhang provided a witness statement dated 12 November 2010 which was received into evidence.  In that statement he said that he decided to export wine to China for use in the hotels managed by his companies in China.  Mr Zhang said that his son handled that aspect of the business.  That is the only transaction conducted by World Town and Mr Zhang said in his witness statement that it was not a major project for his business in the short term. 

17.     Regardless, it cannot be said that one export transaction constitutes the conduct of a business.  It does not have notions of continuity or repetition of actions.  Furthermore, there is no evidence that that activity was conducted for the purpose of profit.  It appears to be a transfer to a related entity to enable the related entity in China to make a profit.  For those reasons, I find that World Town did not conduct a business in Australia, let alone an eligible business as that expression is defined in the Act.

18.     Mr Zhang's evidence was that his companies in China were involved primarily in property development, construction and sales.  His companies have been involved in large residential developments in China.  In addition to those, the Zhejiang Huacheng Development Company (Huacheng) conducts the core business of hotel management.  It has been responsible for constructing some five hotels in China and is currently responsible for managing four of those hotels.  Mr Zhang said that his wife manages Huacheng's hotel operations and that his son is a General Manager of the sales subsidiary.  Mr Zhang also testified that he was involved in residential and shopping mall complexes which are under construction in Shandong and Xanxi.

19.     Mr Zhang said that in September 2008, he met with Mr Richard Gu, the son of a Chinese property developer with a large estate in Shanghai.  Mr Zhang said he discussed his problems in finding a suitable property development opportunity in Perth with Mr Gu's father when in China.  He suggested a meeting with his son. 

20.     

Curiously, in a letter which appears to have been written on behalf of

Mr Zhang dated 2 February 2009 following the Department's request in respect of the 24 month survey, he detailed his attempts to establish a business in Australia.  Although Mr Zhang stated that between August 2007 and January 2008 he was attempting to find a partner to invest in a hotel project in Melbourne, he said those attempts were unsuccessful.  He detailed the establishment of World Town, but there is no mention whatsoever of his meeting with Mr Gu or the fact that he had discussed suitable property development opportunities in Perth.  Nor did he so much as suggest that he should meet with Mr Gu's son and investigate the possibility of being involved in his project in Melbourne.  This is despite the fact that in his witness statement of 12 November 2010 he described having discussed with Mr Gu and his company, AXF (Kinnears) Pty Ltd (AXF), its intention to develop an old rope works factory site into a residential and retail precinct (the Kinnears project).

21.     Mr Gu also made a witness statement dated 17 February 2011 which was admitted into evidence.  In that statement, Mr Gu confirmed he became aware of Mr Zhang's interest in being involved in construction projects in Australia through his father.  He said Mr Zhang travelled to Melbourne in September 2008 to meet him to discuss the possibility of a business venture.  Mr Gu said that although discussions took place, nothing concrete was decided because he was not interested in including a hotel in the Kinnears project.

22.     According to the response prepared by Mr Zhang's lawyers to the Department's audit requests, during the third quarter of 2009, because Mr Gu's project was experiencing cash flow issues, Mr Zhang was again invited to invest in the Kinnears project.  Apparently, Mr Zhang came to Melbourne in October 2009 where further discussions took place about this project.  Minutes of the Board Meeting held on 5 October 2009 describe Mr Zhang's interest in the Kinnears project.  The project is described as a joint venture between AXF and Gamonland Pty Ltd (Gamonland).  The joint venture was 80% owned by AXF and 20% owned by Gamonland.  The old rope factory site was held by Evergreen Homes Pty Ltd (Evergreen) which was the Trustee of the New Pacific (Kinnears) Unit Trust.  The Minutes of the 5 October 2009 meeting record that Mr Zhang agreed to invest in the Kinnears project provided that:

(a)Gamonland was removed from the Kinnears project;

(b)the rope works site property was transferred to a new trustee company of which Mr Gu and or his associates had full control; and

(c)all defaults under a loan agreement with Bankwest were rectified.

23.     A property valuation prepared for Bankwest in August 2009 valued the Kinnears rope works site at $10.6M.  Bankwest had imposed a loan to value ratio (LVR) of 50%.  According to Mr Zhang, the property had been purchased by Evergreen for $17M.  $11.9M of the purchase price was provided by Bankwest which is the equivalent of a LVR of 70%.  The revaluation of the property site down from $17M to $10.6M effectively resulted in the LVR increasing to 112%.  To reduce the LVR to 50%, Evergreen was required to pay Bankwest $6.6M.  In other words, the project needed a substantial injection of additional capital in order to proceed.

24.     According to Mr Zhang and the recitals set out in a Deed made on 1 November 2009 between AXF and Mr Zhang, Evergreen was replaced as the Trustee of the New Pacific Trust by a new corporate entity, New Pacific (Kinnears) Pty Ltd (New Pacific).  All of the lots comprising the rope works site were transferred from Evergreen to New Pacific on 14 October 2010.  Gamonland, which held 200 units in the New Pacific Trust, transferred its right title and interest in those units to AXF.  At that time, the New Pacific Unit Trust had allotted 1,000 units.

25.     Mr Zhang entered into an agreement with AXF which was made on 1 November 2009 regarding his involvement in the Kinnears project.  That agreement was subject to a number of conditions precedent being met.  In particular, Gamonland was required to withdraw from the project and the property transferred from Evergreen to New Pacific.  These conditions appear to have been met.  The agreement also refers to the fact that Bankwest provided a loan of $12.9M to finance the purchase of the Kinnears rope site property.  This is either a typographical error or some $1M of the loan was repaid prior to the revaluation conducted in August 2009.  The reason is that the Deed also states that Bankwest required Evergreen to repay $6.6M to bring the LVR down to 50%.  That would only be accurate if the original loan was $11.9M and not $12.9M.  Nevertheless, for the purposes of this matter, nothing swings from that discrepancy.

26.     According to the Deed, Mr Zhang agreed to purchase 200 units in the New Pacific Unit Trust for a price of $200.00.  In addition, Mr Zhang agreed to make an initial investment of $3M by way of an advance to the Trust Fund pursuant to clause 10 of the Trust Deed. 

27.     It is significant that clause 10 of the Trust Deed makes it clear that advances to the Trust Fund are by way of loan.  The loan, including any interest, is repayable by the Trustee with the consent of the Unit Holders.  Mr Zhang provided AXF with a bank cheque in the sum of $1.5M on 13 January 2010 and a further $1.5M appears to have been transferred to what is described as AXF Group Pty Ltd on 21 February 2011.  I have assumed that this is the second tranche of Mr Zhang's obligation to lend to the Trustee the amount of $3M.  There was no evidence that the monies were provided for shares issued in New Pacific.

28.     The Deed of 1 November 2009 also provides that Mr Zhang was to be appointed a Director of New Pacific commencing 30 days from the date of the conditions precedent being met.  The Deed states Mr Zhang was to be responsible for the overall planning, management, supervision and control of the project from pre-development stage to post-development stage.  For that involvement, he was to receive an annual salary package of $150,000.  On 1 April 2010 Mr Zhang apparently entered into a Deed of Variation with AXF whereby the number of units he acquired was reduced to 190; a 19% interest in the Unit Trust.

29.     

In his supplementary witness statement made on 17 February 2011 Mr Zhang testified that the monies he has invested in the Kinnears project to date is merely a starting point.  Mr Zhang referred to clause 4(c) of the agreement between AXF and himself made on 1 November 2009 where it states that he agreed to comply with ongoing and future funding contribution requirements as a Unit Holder, pursuant to clause 10 of the Trust Deed as determined by the Trustee from time-to-time. 

Mr Zhang then said in his statement:

I want to make in absolutely clear that the money I have invested is not in any way a loan or advance for which I expect to be repaid or upon which I would charge interest.  The money was paid to [sic] as consideration for my 19% interest in the New Pacific (Kinnears) Unit Trust and if the project fails, I will have to bear the loss.

30.     With respect to Mr Zhang, the above statement which he made in evidence is contrary to what is set out at clause 10 of the Trust Deed.  Clause 10 expressly provides that the Trustee may at any time require Unit Holders to advance monies to the Trustee in proportion to the number of units held by each of them.  Clause 10.2 refers specifically to the request and the lending of monies by Unit Holders pursuant to the provision in clause 10.1.  Clause 10.3 then states, as I have mentioned above, the basis on which loans are repaid.  It is clear that clause 10 of the Trust Deed deals with loans made to the Trust by Unit Holders.  The monies Mr Zhang has advanced to the Trustee are in accordance with his agreement at clause 4 and are particularly stated to be pursuant to clause 10 of the Trust Deed.  Accordingly, I find that the monies in the sum $3M advanced to AXF are loan monies advanced in accordance with clause 10 of the Unit Trust Deed of New Pacific (Kinnears) Unit Trust.

31.     Ms R Germov of counsel, who appeared on behalf of Mr Zhang, submitted that Mr Zhang's purchase of 190 units in the New Pacific Unit Trust indicated that he had obtained a substantial ownership interest in an eligible business in Australia.  With respect to Ms Germov, I do not agree.

substantial ownership interest

32.     Putting aside for the moment the question of whether the Kinnears project falls under the definition of eligible business in s 134(10) of the Act, to avoid cancellation of a business visa, the applicant must have acquired a substantial ownership interest in that business.  The expression ownership interest is defined in s 134(10) of the Act in the following way:

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; 

including such an interest held indirectly through one or more interposed companies, partnerships or trusts. 

33.     The first thing to observe about the definition is that it is conclusive of the interests which fall within the definition.  In Mr Zhang's case, to satisfy the definition, he must demonstrate that he is a substantial shareholder in the company which carries on the business.  That shareholding may be held by an intermediary, such as an interposed company, partnership or trust.  In Mr Zhang's case, the company carrying on the business (assuming it does so), would appear to be the Trustee of the New Pacific Trust, New Pacific.  In the undated Deed executed by Gamonland, AXF, Evergreen, New Pacific and the Guarantors to the lending arrangement with Bankwest, it is stated that Evergreen resigns as co-trustee of the Trust effective upon the completion of the property transfer.  Therefore, following that transfer, the remaining Trustee was New Pacific.  The Trust Deed provides for the appointment and removal of the Trustee with the consent of Unit Holders.  I have assumed that the Unit Holders consented to New Pacific replacing Evergreen as Trustee.  The issue therefore is whether Mr Zhang holds any shares in New Pacific.

34.     When the Minister filed his Statement of Facts and Contentions in December 2010, there was no evidence that Mr Zhang or any interposed entity related to him had acquired any shares in New Pacific.  In fact, the Minister's Statement of Facts and Contentions states that a recent ASIC search indicated Mr Zhang was not a shareholder of New Pacific.  However, by the time this matter came on for hearing, Mr Zhang's lawyers had clearly attempted to rectify that position. 

35.     Attached to Mr Zhang's supplementary witness statement were Minutes of a meeting of New Pacific held on 27 January 2011.  Those Minutes indicate that Mr Gu was the sole Director and Shareholder of New Pacific.  The resolution passed at that meeting was that Mr Zhang be appointed a Director of New Pacific and that Mr Gu transfer 19% or 30.4 shares to World Town.  I am not aware that it is possible to transfer a percentage of one share and therefore I have assumed that the agreement was to transfer 30 shares to World Town.  Although Mr Zhang testified that attached to his witness statement was a transfer of shares form signed on 27 January 2011, the only attachment bearing that date is the Minute I have referred to above.  It is plainly not a share transfer form.

36.     Attached to Mr Zhang's supplementary witness statement is a Form 484 under the Corporations Act 2001 notifying ASIC of a change to company details.  The form has clearly been downloaded from ASIC's website and completed by making entries on that form.  It has been signed by Mr Gu, although it has not been dated.  This is despite the fact that there is a warning beside the signature block which indicates that the Form must be signed and dated by a current office holder after it is printed.  There is no evidence that that occurred.  Furthermore, the change notification page simply notes that there has been a transfer of shares.  There is no evidence of the number of shares that Mr Gu holds in New Pacific or the fact that some 30 shares had been transferred to Mr Zhang. 

37.     There is a further form amongst those documents on which the person notifying ASIC of the change in the register is required to set out those changes to the register of members for proprietary companies.  Other than the fact that the box indicating company has been ticked and the changes relate to fully paid shares, no other details have been provided.  Quite plainly, the document which is attached to Mr Zhang's supplementary witness statement has not been lodged with ASIC as it is incomplete.  In fact, a search of ASIC’s National Names Index obtained on 3 May 2011 discloses that the most recently received document lodged on 19 August 2010 was a Form 484A1 which is a change to company details, specifically a change of address.

38.     While it is correct to say that Mr Gu has signed a notice to ASIC purporting to be a change of company details, there is no evidence of a transfer of shares having taken place from Mr Gu to Mr Zhang nor is there any evidence of shares being issued to Mr Zhang.  Therefore, despite what appears to be an attempt to rectify a deficiency in Mr Zhang's application to this Tribunal, the evidence before me remains that Mr Zhang has not acquired a substantial interest or any interest at all, in New Pacific.

39.     In Mr Zhang’s outline of Facts and Contentions lodged with the Tribunal in November 2010, he submitted that he satisfied the substantial ownership interest requirement because he had purchased units in New Pacific which gave him a 19% legal and beneficial ownership interest in New Pacific's assets.  Mr Zhang contended that this interest fell within the definition in s 134(10) of the Act and he referred to a decision of the Full Court of the Federal Court (Spender, Greenwood and Logan JJ) in Minister for Immigration and Citizenship v Hart (2009) 179 FCR 212 (Hart's case).  With respect to Mr Zhang, that is incorrect.  As Spender J said, at 217:

It is true also that, under the general law, a shareholder in a company has no interest, legal or equitable, in the assets of the company.

40.     After explaining that the definition of ownership interest as found in s 134(10) of the Act was meant to apply to situations outside the orthodox position which is understood by that expression, his Honour said, at 218: 

The definition, inelegant and not in conformity with the ordinary understanding of the general law as it may be, makes plain that a shareholder in a company that carries on the business has an interest in the business, and that interest is an ownership interest.

41.     Greenwood J pointed out that categories (b) and (c) under the definition of ownership interest would result in the person having a proprietorial interest in the business whereas a shareholder in a company would not.  His Honour then said that it was necessary, for the purposes of the definition, to create a statutory construct where an applicant for a business visa would have an ownership interest in a qualifying business as a shareholder.  In the case before him, Ms Hart held shares in a company which was the Trustee of a discretionary trust.  In that situation, Ms Hart did not have any legal or beneficial interest in any of the assets of the Trust.  His Honour then said, at 228: 

Having regard to the statutory purpose for an Established Business Visa and the relationship between the definition of ownership interest and the criteria to be satisfied in respect of such a visa, I am not satisfied that the proper construction is the disqualification of an ownership interest in a qualifying business in circumstances where the applicant holds a share in a company conducting the business as trustee of a discretionary trust.

42.     

In effect, his Honour held that a person holds an ownership interest under s 134(10) of the Act if that person holds a share in the company conducting the business as a trustee.  Of course the same reasoning should be applied in

Mr Zhang's circumstances because the cancellation provisions in s 134 of the Act apply to all sub-classes of business visas.  Ms Hart's business visa was a sub-class 845 while Mr Zhang's visa is a sub-class 132 visa.  It has the words Business Skills in its title and therefore the definition found in s 134(10) of the Act applies. 

43. Mr Zhang, in his Contentions, also referred to reg 1.11A of the Migration Regulations 1994 (the Regulations).  In my opinion, that Regulation does not assist at all.  It is simply a machinery provision which requires documentary evidence of beneficial ownership of an asset, eligible investment or an ownership interest.

44.     Although Mr Zhang also referred to reg 1.11 of the Regulations and the Policy Guidelines made by the Department of Immigration and Citizenship, in my opinion, neither of those documents assist Mr Zhang's case.  Regulation 1.11 simply describes what is a main business where that distinction is required under the Act or Regulations.  Its relevance lies in the application for a visa rather than its cancellation. 

45.     The Policy Guidelines made by the Department of Immigration and Citizenship cannot of course assist in the interpretation of an Act or Regulations.  As Moore J said in Port of Brisbane Corporation v Deputy Commissioner of Taxation (2004) 81 ALD 549, at 550:

[26] The decision of Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 concerned a deportation order under the Migration Act 1958 (Cth). The then president of the tribunal, Brennan J, discussed the role of ministerial policy in the exercise of the discretionary power to deport. His Honour concluded that while the tribunal was not bound to apply that policy, it should only depart from it cautiously and sparingly, particularly if parliament had in fact scrutinised and approved the policy. That case does not suggest (nor does any other case of which I am aware) that guidelines or policy documents which express a view about the scope or meaning of legislation provide a tool or aid in construing the legislation.

46.     It follows from the above that I must find Mr Zhang has not obtained a substantial ownership interest in an eligible business in Australia because he cannot satisfy the definition of ownership interest in s 134(10) of the Act.  He has not acquired any shares whatsoever in New Pacific, the Trustee of the New Pacific Trust.  In fact, it is not particularly clear from the evidence that the Trustee will conduct the Kinnears project development.  While Mr Zhang entered into an employment agreement with New Pacific on 27 January 2011 in his capacity as project manager, it appears that the Deed made on 1 November 2009 between AXF and Mr Zhang also purports to appoint Mr Zhang as the project manager in accordance with the conditions set out in clause 6 of that Deed.  Although Mr Zhang was to be appointed a director of New Pacific, and he has signed a consent to the appointment, there was no evidence of that appointment being lodged with ASIC.  Clause 6 of the November 2009 Deed also provides that Mr Zhang was to sign an employment agreement with New Pacific as the employer.  It refers to incorporating the terms of this clause 5 despite the fact that the clause is numbered 6.  At the end of the day, this probably matters not because there is no evidence of any share transfer verifying Mr Zhang's ownership interest in New Pacific.

eligible business

47.     In the event that I am wrong about whether Mr Zhang has an ownership interest in New Pacific, I should also determine whether New Pacific in fact conducts an eligible business as that expression is defined in the Act.  I have set out the definition in [6] above. 

48.     While the definition of eligible business refers to present results or those reasonably expected to occur in the future, the problem with the Kinnears project is that it has not passed beyond the preliminary stage of purchase of the land.  At present, the land on which the development property sits is zoned business 3.  It also has a part heritage overlay.  The documentary evidence indicates that the current planning permit allows use and development for a commercial display centre.  The purpose of the business 3 zone is:

To encourage the integrated development of offices and manufacturing industries and associated commercial and industrial uses.

Accommodation and shops are prohibited uses.  In order to provide for these, the land needs to be re-zoned.  AXF has commissioned and been provided with a socio-economic impact assessment prepared by Essential Economics Pty Ltd.  Many possible use options are discussed in that assessment.  However, the majority of those uses would require re-zoning of the land.  An application for re-zoning was lodged with the Maribyrnong City Council in May 2010.

49.     In his witness statement dated 12 November 2010 Mr Zhang said that the development of the Kinnears rope works property had been complicated by the Victorian state election.  At the time that he made that statement, the election had not been held.  Nevertheless, Mr Zhang said he had been advised that a decision regarding the re-zoning application would not be made until mid 2011.  I am not aware of any such decision at the time of writing these reasons.  In fact, an examination of the documents lodged with the re-zoning application discloses that the basis of the application is the development of 1,449 apartments.  There is no mention, in the re-zoning application or the documents tendered with it, of a hotel.  Yet this was, according to Mr Zhang, a mandatory requirement for his participation in the development project.  In any event, Mr Zhang stated in his witness statement that until the re-zoning application had been accepted, there was not much more that he could do in relation to his investment in the Kinnears project other than to provide advice and remain informed about the project. 

50.     There are also outstanding issues regarding the re-financing of the Bankwest loan.  In his witness statement, Mr Gu said that the loan facility with Bankwest was due to expire on 5 February 2011 although it had been extended to 5 April 2011.  That time has now passed and I do not have any further evidentiary material regarding its current status.  I can only assume that negotiations are ongoing as Mr Gu said in his oral evidence at the hearing. 

51.     

It should be apparent that the project with which Mr Zhang is now involved is at a preliminary stage.  It is difficult to describe Mr Zhang’s involvement in the

proposed re-development project as carrying on a business.  As I have said above at [10] – [12], business is generally described as an activity engaged in for the purpose of profit on a continuous and repetitive basis.  Further, as the High Court said in Murry, a business is not a thing or things, but rather, it is a course of conduct which involves notions of continuity and repetition of actions.  I am also mindful of the statement made by Bowen CJ and Franki J in Ferguson’s case where they said every business has to begin and that even isolated activities may, in some circumstances, be the commencement of carrying on a business. 

52.     What is happening at the moment in the Kinnears project cannot, in my opinion, be properly described as a business or the commencement of a business.  At the present time, it merely remains in prospect.  In order for this to qualify as an eligible business, it must also have the attributes described in s 134(10) of the Act.  The evidence before me must cause me to reasonably believe that it will result in one of the matters referred to in (a)-(f) of the definition.  At the present stage, the highest that it could be reasonably put is that if the development proceeds, it might satisfy the eligible business definition in that it might create or maintain employment in Australia or result in commercial activity and competitiveness within sectors of the Australian economy.  However, it would be speculative of me to make such a finding at this point in time.  Accordingly, I find that the Kinnears project does not fall within the definition of eligible business as set out in s 134(10) of the Act.

USING SKILLS TO ACTIVELY PARTICIPATE IN MANAGEMENT OF A BUSINESS

53.     In the event that I am wrong about whether Mr Zhang has obtained a substantial ownership interest in an eligible business in Australia, I should briefly examine the second requirement, that is, whether he has been utilising his skills in actively participating at a senior level in the day-to-day management of that business. 

54.     For the purposes of this analysis, quite obviously, I must assume that there is an eligible business in Australia.

55.     The only evidence before me of Mr Zhang exercising his skills in actively participating at a senior level in the day-to-day management of the Kinnears project is that he was in regular contact with Mr Gu by telephone from China.  Although, in cross-examination, Mr Zhang said he spent some 30 hours per week discussing the project with Mr Gu, he agreed that did not occur every week.  In fact when asked on average how many hours he spent on the project per week he did not provide a figure but rather said that it was in the early stages of planning.  When his telephone records were shown to him for 2010, he agreed they were correct.  They disclosed only minimal telephone contact between January and May of that year.  In fact Mr Zhang finally conceded that he may have spent about 20 hours per week on the project but that much of that time was simply thinking about it.  He was not in fact doing anything. 

56.     I did not have in evidence any correspondence between Mr Zhang and Mr Gu to indicate he was exercising his skills or actively participating at a senior level in the management of the project.  Of course that possibly reflects the fact that he only recently entered into the employment agreement with New Pacific, on 27 January 2011.  Although he was appointed project manager, the project was at a standstill save for ongoing negotiations regarding re-financing.  Presumably that is being conducted by Mr Gu who has the relationship with the bank.  Furthermore, Mr Zhang has spent only 37 days in Australia since his first arrival in 2006.  In my opinion, that in itself indicates that Mr Zhang has not been involved in the day-to-day management of the Kinnears project.  I find that Mr Zhang cannot satisfy the requirement to be using his skills in actively participating at a senior level in the day-to-day management of an eligible business in Australia.

GENUINE EFFORT

57.Section 134(2) of the Act provides:

…

(2)The Minister must not cancel a business visa under subsection (1) if the Minister is satisfied that its holder:

(a)has made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia; and

(b)has made a genuine effort to utilise his or her skills in actively participating at a senior level in the day-to-day management of that business; and

(c)intends to continue to make such genuine efforts.

…

58.     The expression genuine effort is not defined in the Act.  Therefore, the words in that expression must be given their ordinary meaning taking into account the context in which they appear in the Act.  The Shorter Oxford English Dictionary defines genuine as:

3.  Not spurious; authentic.  4.  being as represented; real, true, not counterfeit, unadulterated.

Effort is defined as:

2.  A strenuous exertion of power, physical or mental; a laborious attempt; a struggle.

Therefore, in accordance with the context in which that phrase appears in the Act, my opinion is that the phrase means a real and not fabricated exertion of power, physical or mental.

59.     As the definitions referred to above suggest, in order to satisfy the provisions in s 134(2) of the Act, there must be evidence of the exertion of physical or mental power in a real attempt to obtain substantial ownership interest in an eligible business in Australia; to have utilised his skills in actively participating at a senior level in the day-to-day management of the business; and evidence that the person intends to continue to make genuine efforts.  For the business visa not to be cancelled, all three of the above requirements must be met. 

60.     The only company in which Mr Zhang has acquired shares is World Town.  However, as I have already found, that company was not carrying on a business at all and therefore does not satisfy the definition of eligible business in Australia.  Mr Zhang’s involvement with the Kinnears project also presents a number of difficulties.  While it appears that Mr Zhang has become significantly involved in that project, it is difficult to distinguish that involvement from a mere investment.  In fact, his involvement to date has not required him to exercise his skills in actively participating at a senior level in the day-to-day management of the Kinnears project.  That is because the project is not yet underway.

61.     The Act also sets out matters which the Minister may take into account in determining whether a person has made a genuine effort.  These are set out in s 134(3) of the Act which 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). 

62.     The fact that Mr Zhang has only been present in Australia for 37 days since 2006 is indicative of the fact that, at this point in time, his involvement in the Kinnears project is akin to that of an investor.  That is not to say that the situation will not change in the future, however, at this early stage, it is simply not possible to determine what might happen in the future.

63.     Mr Zhang contended that I should have regard to four of the factors set out in s 134(3) of the Act.  In particular, Mr Zhang contended that:

(a)he has made a genuine effort to be involved in the Kinnears project, an eligible business, and has obtained a substantial interest in it;

(b)there is no reason to believe he will not continue his investment in the Kinnears project;

(c)he has invested considerable money, effort and energy in Australia in a business consistent with his business expertise; and

(d)he has purchased residential property in Melbourne and has engaged in activities such as wine exports.

64.     To begin with the last item listed above, it is incorrect to state that Mr Zhang engaged in activities described as wine exports.  There was only one consignment of wine from Australia to China.  In my opinion, that particular transaction does not evidence the conduct of a business in Australia let alone an eligible business.  Furthermore, it does not disclose any genuine effort to satisfy all three limbs of s 134(2) of the Act.  Quite to the contrary, it indicates a single transaction which Mr Zhang admits he is not prepared to repeat.

65.     Mr Zhang’s purchase of residential property in Melbourne cannot be indicative of the matters set out in s 134(2) of the Act.  It has nothing to do with either World Town’s export of wine to China or with the Kinnears project.  While it might be said that Mr Zhang will require accommodation in Australia should the Kinnears project proceed, that remains speculative.  In fact, in over four years since obtaining his business visa, Mr Zhang has not resided in Australia for any length of time nor has there been any reason why he would do so.  In those circumstances, the purchase of two residential properties could equally be seen as an investment.  At this point in time, the purchase of those residential properties does not, in my opinion, advance Mr Zhang’s case. 

66.     Mr Zhang’s contention that he has invested considerable money into the Kinnears project appears to be correct.  However, as I have already stated above, the provision of some $3M in funds pursuant to Clause 10 of the Trust Deed is plainly a loan.  The advancement of those funds to the Kinnears project does not assist his claim that he has made a genuine effort to satisfy the three limbs of s 134(2) of the Act.  In fact, his presence in Australia at this point of the project is not required at all.  Nothing can be done to further that project until the Kinnears rope works site is re-zoned.  That has not yet happened, nor is it certain that it will happen. 

67.     There are also funding issues which remain outstanding.  The proposed development is said to cost in excess of $600M and, while of course it is premature at this stage to discuss the possible sources of those monies, the amount invested by Mr Zhang at this time is relatively small.  The fact that development costs are as large as indicated would suggest that at the present time, this development is at a very early and speculative stage.

68.     Because there is nothing which can be done on the project until such time as re-zoning is approved, Mr Zhang cannot be said to have utilised his business skills in the day–to-day management of the project.  The project is merely in prospect and there is nothing on which Mr Zhang can reasonably exercise his skills.  In fact Mr Zhang has testified that his business skills were in planning and marketing.  There was no evidence of Mr Zhang utilising those skills at this stage.  He was not involved in the design of the project or obtaining re-zoning approval.  In fact, Mr Zhang testified that he would not proceed with his involvement in the project unless a hotel was included in the development.  There is no certainty that the re-zoning, even if it is approved, will include that kind of development. 

69.     While the value of assets transferred to Australia is a relevant fact to consider, it is not simply the value of assets transferred which must be considered.  The only assets which must be considered are those which are transferred for use in obtaining an interest in an eligible business.  Neither the $3M advanced by Mr Zhang nor the monies he has expended in purchasing the two residential properties are for the purpose of obtaining an interest in an eligible business.  Furthermore, to date, there has been no business activity undertaken by Mr Zhang in Australia. 

70.     While I accept that there is a business proposal put forward by Mr Zhang in relation to the Kinnears project, and the documents indicate the existence of partners in what appears to be a joint venture for a business proposal, that is about as far as any genuine effort by Mr Zhang can be described.  In fact, Mr Zhang’s involvement in the Kinnears project at this very early stage could equally be described as simply an investment.  That of course is not to say that the position will not change at some future date.  However, at this point in time, I am not satisfied that, on the balance of probability, Mr Zhang has made a genuine effort to satisfy the three limbs of s 134(2) of the Act.

CONCLUSION

71.     Although Mr Zhang was granted a Business Skills Visa in September 2006 there is no evidence that Mr Zhang either obtained a substantial ownership interest in an eligible business in Australia or that he was utilising his skills actively participating at a senior level in the day-to-day management of that business prior to his involvement in the Kinnears project in October 2009.  Mr Zhang’s incorporation of World Town and its single transaction involving the export of wine to China cannot be described as an eligible business in Australia.

72.     

Mr Zhang’s involvement in the Kinnears development project has a number of hurdles to overcome before that project can be described as an eligible business in Australia.  In fact, it may never come to fruition.  There remain issues regarding

re-financing of the original loan to purchase the Kinnears rope works site; the

re-zoning of the site in order to allow the development envisaged by Mr Gu and Mr Zhang; and the obtaining of construction finance for the development to proceed.  These issues, while they continue to exist, do not permit the Kinnears project being described as an eligible business in Australia. 

73.     Other than the wine export and Mr Zhang’s involvement in the Kinnears project, there is nothing which Mr Zhang can point to which would establish that he has met the basic requirements to obtain a substantial ownership interest in an eligible business in Australia or to utilise his skills in actively participating at a senior level in the day-to-day management of that business.  Furthermore, it would be purely speculative to conclude that Mr Zhang has made a genuine effort to satisfy those two requirements and that he intends to continue to make genuine efforts to meet them.  That may happen, it may not.  Much will depend on the three outstanding issues I have referred to above. 

74. For the reasons I have attempted to articulate above, the discretion to cancel Mr Zhang’s visa pursuant to s 134(1) of the Act arises. In my view, the Minister has correctly exercised that discretion to cancel Mr Zhang’s business visa. That is not to say that Mr Zhang cannot apply at a future date for the issue of another business visa. In fact, if the project goes ahead and all the funding issues have been resolved, there seems to be no good reason why Mr Zhang should not be granted a business visa in the future provided that he satisfies all of the statutory requirements for its issue.

75.     The decision made by Minister to cancel Mr Zhang’s Business Skills Visa on 19 April 2010 was correct.  I affirm that decision.

I certify that the seventy-five [75] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr Egon Fice, Senior Member

Signed:

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

E. Montalto, Associate

Dates of Hearing  22 February 2011
Date of Decision  4 May 2011
Counsel for the Applicant              Ms R. Germov
Solicitor for the Applicant               Mr V. Nguyen, Asia Pacific Lawyers
Solicitor for the Respondent         Mr R. Bower, Clayton Utz