Zheng and Minister for Immigration and Citizenship
[2010] AATA 261
•15 April 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 261
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/2428
General Administrative DIVISION ) Re Xing Zheng Applicant
And
Minister for Immigration and Citizenship
Respondent
DECISION
Tribunal Senior Member Jill Toohey Date15 April 2010
PlaceSydney
Decision The Tribunal affirms the decision under review. ...................[sgd]...........................
Senior Member
CATCHWORDS
MIGRATION – business skills visa – investment in retirement village development – substantial ownership interest in company that was essentially a vehicle for investment – company not carrying on business – not an eligible business – genuine efforts not directed towards an eligible business – no ground to exercise residual discretion - decision under review affirmed
Migration Act1958
Administrative Appeals Tribunal Act 1975Basuki and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 630
Re Haimin Luo andMinister for Immigration and Citizenship [2008] AATA 976
Hope v Bathurst City Council 144 CLR 1
Koosasi v Minister for Immigration and Citizenship [2007] AATA 1311
Re Kushner and Minister for Immigration [2008] AATA 1170
Li and Minister for Immigration [2009] AATA 501
Re Liu and Minister for Immigration (2009) 106 ALD 691
Pan and MIAC [2007] AATA 1724
Puzey v Commissioner of Taxation (2003) 131 FCR 244
Rasyid and Minister for Immigration and Citizenship [2009] AATA 341
Shi v Migration Agents Registration Board [2008] HCA 31
Weng and Minister for Immigration and Citizenship [2010] AATA 60
Yam v MIMIA [2004] AATA 283REASONS FOR DECISION
15 April 2010 Senior Member Jill Toohey INTRODUCTION
1. Mr Xing Zheng is a Chinese citizen. On 29 September 2005, he was granted a business skills visa which included his wife and two children as his dependents.
2. On 22 December 2008, the Minister for Immigration and Citizenship (the Minister) notified Mr Zheng of his intention to cancel his visa by reason of his failure to satisfy the relevant requirements of the Migration Act1958 (the Act), and invited Mr Zheng to make submissions about the proposed cancellation.
3. On 6 May 2009, Mr Zheng having made submissions, the Minister cancelled his visa. Mr Zheng seeks review of that decision.
THE LEGISLATION
4. By s 134 (1) of the the Act, the Minister may cancel a business skills visa if satisfied that the 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 hold substantial ownership in and utilise his or her skills in actively participating at a senior level in the day-to-day management of, an eligible business in Australia.
5. By s 134 (2), the Minister must not cancel a business visa if satisfied that the 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.
THE ISSUES
6. I have to decide:
(i)whether any of the grounds in s 134(1) of the Act for cancellation of Mr Zheng’s business skills visa is made out;
(ii)if so, whether Mr Zheng has made genuine efforts to satisfy the necessary criteria;
(iii)if Mr Zheng has not made genuine efforts to satisfy the necessary criteria, whether the Tribunal should nevertheless exercise its residual discretion in his favour.
PRELIMINARY ISSUE
7. A preliminary issue arises as to the evidence the Tribunal can take into account in determining this application. The issue has arisen in other matters before the Tribunal including cancellations of business skills visas. For convenience, I will simply restate the reasons I gave in Weng and Minister for Immigration and Citizenship [2010] AATA 60.
8. The Minister submits that the Tribunal is confined to evidence as at the conclusion of the three-year period provided for by ss 134(9) and 135(4) of the Act. In Mr Zheng’s case, that period expired three years from 19 January 2006, being the date he arrived in Australia following the grant of his business skills visa.
9. The Minister relies on what he says is Parliament’s clear intention in the Act, the effect of s 43(1) of the Administrative Appeals Tribunal Act 1975, and the decision of the High Court in Shi v Migration Agents Registration Board[2008] HCA 31.
10. Mr Zheng submits that the Tribunal is not so confined and that evidence of events after the expiry of the delegate’s power can be taken into account. At the very least, he says, evidence of facts and circumstance after that time may be taken into account in determining whether he satisfies the genuine efforts test.
11. Shi (above) concerned the cancellation of a migration agent’s registration. The High Court decided the Tribunal could take into account facts and circumstances after the cancellation decision when determining whether Mr Shi was a fit and proper person to be a migration agent. Shi does not finally determine the question in relation to cancellation of a business skills visa but the principles enunciated by the Court are relevant.
12. The starting point in each case is the enabling legislation and the “precise nature and incidents of the decision that is the subject of the review”. It “may be inherent in the nature of a particular decision that review is confined to past events”: Kirby J at [25] and [44].
13. Otherwise, unless the enabling legislation provides a statutory basis for confining the Tribunal to past events, unless there is a “critical statutory question as to a particular time”, the Tribunal may take into account information about matters occurring after the decision under review: Hayne and Heydon JJ at [99]. “Where the decision to be made contains no temporal element, evidence of matters occurring after the original decision may be taken into account”: Kiefel J at [142]
14. The Minister contends that the three year period provided by ss 134(9) and 135(4) of the Act is just such a temporal limit. The Tribunal has rejected that view in a number or cases. See, for example, Re Liu and Minister for Immigration (2009) 106 ALD 691; Re Kushner and Minister for Immigration [2008] AATA 1170); Rasyid and Minister for Immigration and Citizenship [2009] AATA 341. In other cases the Tribunal has decided differently: Re Haimin Luo andMinister for Immigration and Citizenship [2008] AATA 976; Li and Minister for Immigration [2009] AATA 501.
15. I do not agree that the Tribunal is constrained in the way contended for by the Minister. I am not persuaded that the three-year period is critical in the sense contemplated by Shi. Its purpose is to give some certainty to the business community, rather than being a critical matter going to the scope and purpose of the business visa legislation itself.
16. I am satisfied that I can take into account facts and circumstances since the cancellation of Mr Zheng’s visa.
MR ZHENG’S EVIDENCE
17. Mr Zheng is the chairman and managing director of a group of companies in China including the Dalian Jinbaiwei Food Co Ltd which employs around 800 people in the production and sale of meat and seafood. His home is in China where his wife also lives. His daughter lives in Sydney in a home purchased by Mr Zheng in about April 2009.
18. Mr Zheng visited Australia for the first time in April 2004 to investigate the general economic environment. He became interested in establishing a sausage factory in Canberra and exporting Australian chicken and pork products to China. On 7 April 2004, Mr Zheng registered in New South Wales a company known as Kase Group Pty Ltd, of which he was director with a 60 per cent interest, for the purpose of his plan. After he returned to China he pursued various contacts in China and Australia and, in May 2004, he applied for a business skills visa. He was granted a visa on 29 September 2005.
19. Throughout 2005 and 2006, Mr Zheng continued to pursue his business plan from China, making occasional brief visits to Australia. However, by early 2007, a number of obstacles had arisen, including the Australia-China Free Trade Agreement which did not allow trade in chicken and pork, and Mr Zheng decided that his proposal was not viable.
20. In 2008, global economic conditions meant that Mr Zheng’s business in China took up most of his time and he did not pursue his interests in Australia. By 2009, economic conditions had improved and he started investigating opportunities in Australia again. He had already considered real estate on a visit in 2007 and decided to investigate this further.
21. In April 2009, Mr Zheng was introduced to Stephen Hardy, executive officer of the Hindmarsh Group (Hindmarsh), a property developer with interests throughout Australia including nursing homes and retirement villages. At the time, Hindmarsh was building Bellerive retirement village at Woden in the ACT in conjunction with the ACT Government. The development is in two stages: stage one had been completed by the time Mr Zheng and Mr Hardy met and is now being sold; stage two has received development approval in recent weeks and construction is due to start around September 2010.
22. On 7 April 2009, Mr Zheng and Mr Hardy, on behalf of Woden Retirement Developments Pty Ltd (Woden Pty Ltd), signed a “Letter of Intent” which noted that “Hindmarsh” had received development approval for the establishment of Bellerive retirement village; it was agreed “in principle” that Mr Zheng would “invest in the project and take an active role at a senior level”. The letter recorded that documents had been prepared to allow Mr Zheng to invest $AUD1 million and obtain a 10.75 per cent share in the development entity; it was intended that this would occur via a Shareholders Agreement of Woden Pty Ltd of which Mr Zheng would become a Board member with responsibilities including but not limited to:
·“As a Director, to regularly review progress reports on design, authority approvals, funding, construction, marketing and project completion;
·Attendance at Board meetings;
·Seek Chinese residents for the village;
·Advise on design or financing aspects to suit Chinese residents;
·Introduce ACT organisations such as Hindmarsh and other consultants to retirement industry opportunities in China;
·Assist the Hindmarsh (sic) in procurement of materials for this project and for other Hindmarsh projects in Australia”.
23. Around 24 April 2009, Mr Zheng transferred $A1 million to Woden Pty Ltd through HSBC Bank Australia.
24. Since April 2009, Mr Zheng has made occasional visits to Australia, generally for up to a week. He maintains that, as economic conditions in China have eased, he now spends, on average, two to three days each week on Hindmarsh-related activities. He has participated in two Woden Pty Ltd Board meetings in Canberra and one in China. He has been researching and learning about Hindmarsh’s business including construction materials and costs. He attended the opening of stage one of the Bellerive development by the ACT Chief Minister. He has visited retirement villages in China that Hindmarsh might manage and has advised Hindmarsh on landscape design for the second stage of the Bellerive development including arranging samples of landscaping design; his suggestions are still being considered and have not been formally adopted. He has also been obtaining quotes from Chinese suppliers for materials for the Bellerive project. Faxes sent and received by Mr Zheng’s assistant in China show requests for quotes for materials including ceramic tiles, lighting and aluminium, and quotes received.
25. Mr Zheng gave evidence that he wants to continue to be involved with Hindmarsh and, if there are further investment opportunities, he will certainly be interested. He believes there is a huge potential market in China for retirement villages and it would be very good if Hindmarsh could get into that market. He would recommend to the Board of Hindmarsh that Woden Pty Ltd be the investment vehicle for the Chinese market. He concedes that he could still help Hindmarsh in China without a business skills visa but holding the visa makes things a lot easier and more convenient.
26. Mr Zheng’s application relies on his involvement in Woden Retirement Developments Pty Ltd. He is no longer pursuing his original plan for a meat business.
27. He relies on his involvement in Kase Group Pty Ltd only insofar as it supports his claim to have made genuine efforts to obtain the necessary business interests in Australia.
EVIDENCE OF MR STEPHEN HARDY
28. The Tribunal heard evidence from Stephen Hardy, executive officer of Hindmarsh, that Hindmarsh is a diverse group of companies with some $A16 million of construction projects currently underway including at universities and retirement villages.
29. Mr Hardy gave evidence that the Bellerive retirement village is a joint venture between Hindmarsh and the ACT Government. Woden Retirement Developments Pty Ltd was established to facilitate some of the funds required for the project because the costs were greater than bank loans which covered only approximately 70 per cent of the project costs. It is essentially a company that provides funding for the Bellerive project. It has no employees and would probably be wound up once this project is completed.
30. Stage one of the Bellerive development was already well underway when Mr Zheng became involved with Hindmarsh. Mr Hardy gave evidence that said that there are no firm plans to use Mr Zheng’s design plans in stage two, but he will be looking at them closely now that development approval has been received. Other materials, such as light, for which Mr Zheng has obtained quotes might be subject to Australian design standards and might not be used. However, his ability to secure aluminium sheets at half the Australian price will benefit Hindmarsh projects.
31. Mr Hardy concedes that Mr Zheng could carry out all his activities from China, without a business skills visa, but says it would be a great shame given the enthusiasm Mr Zheng has developed for the project.
32. Mr Hardy gave evidence that he hopes that the valuable relationship that has been established with Mr Zheng will continue; Hindmarsh has already made contact with the Red Cross in China to discuss retirement villages there and regard Mr Zheng as valuable to that and other projects.
HAS MR ZHENG OBTAINED A SUBSTANTIAL OWNERSHIP INTEREST IN AN ELIGIBLE BUSINESS
Substantial ownership interest
33. 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: s 134(10).
34. Substantial ownership interest is not defined in the Act. I agree with the Tribunal’s decision in Basuki and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 630 at [32] that, in the context of s 134, “substantial” indicates “a degree of ownership of a company or a business in the sense of ability to control or manage the business, and the absolute monetary value of the business. … a degree of ownership of and investment in the business in a relative or value sense that is not insubstantial or nominal”.
35. Australian Securities and Investments Commission documents show that Mr Zheng is one of five directors of Woden Pty Ltd. Shares in the company are owned by Hindmarsh Woden Development Pty Ltd (73.25 per cent), Mr Zheng (10.75 per cent) and another Chinese director (16 per cent).
36. I am satisfied that Mr Zheng has an ownership interest in Woden Pty Ltd. His share, based on his investment of approximately $A1 million, is not insubstantial or nominal and gives him an ability to control or manage the business of that company. I am satisfied he has a substantial ownership interest in Woden Pty Ltd.
Is Woden Pty Ltd an eligible business
37. For Mr Zheng’s application to succeed, Woden Pty Ltd must first be carrying on business, and that business must be eligible within the meaning of the Act.
38. The term “business” is not defined in the Act but it denotes “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”: Hope v Bathurst City Council 144 CLR 1 per Mason J at [14].
39. In Puzey v Commissioner of Taxation (2003) 131 FCR 244, the Federal Court (Hill and Carr JJ, French J agreeing) said that whether a person is carrying on a business will depend on the facts and circumstances. Size is not determinative and nor is whether a person is also engaged in other activity such as full-time employment; a person may appoint another to perform the activity of the business. However:
It will be relevant in deciding whether a business is carried on that there is some repetition of acts and that the activities in question have "something of a permanent character"; Hope per Mason J at 8. What is required is that activities be engaged upon "on a continuous and repetitive basis"; Hope ibid at 9. However, perhaps not too much attention should be given to the concept of repetition where the activity is one, such as plantation operation, where the activity will continue over a relatively long period of time but where there will be significant periods of what may be referred to as inactivity. Business does not mean being busy.
In deciding whether or not a business is carried on courts have pointed to what have been called in the United Kingdom the "badges of trade," indicia which, while no one of them will be determinative of whether a business is carried on, collectively will demonstrate a business. These include the profit motive (although a non profit company may still carry on a business), acting in a business like way, (although many businesses may be found which operate in a non-business like way), the keeping of books of account and records, (although the fact that there are none will not necessitate the conclusion that a business is not carried on) and repetition (although a fixed term project may still be a business).
40. Even given its broadest reading, Woden Pty Ltd it does not carry on business. There is no evidence of anything that it “conducts” or “carries on”. It has no “activities”. There is no evidence of a business plan and no evidence of financial affairs or anything else that requires management in any real sense. It has no employees. Other than formalities such as that the Australian Securities and Investments Commission had been notified of its directors, and share certificates had been issued, minutes of its Board meetings do not disclose any business of Woden Pty Ltd but, rather, record Hindmarsh’s activities and, in particular, progress of stage two of the Bellerive development.
41. That Woden Pty Ltd is essentially a facility to enable funding for the Bellerive development is supported by Mr Hardy’s evidence that it will probably be wound up at the end of the Bellerive development. It is essentially a vehicle for investment in Hindmarsh’s Bellerive project.
42. I am satisfied, on the evidence, that Woden Pty Ltd is not carrying on business.
43. It follows that Woden Pty Ltd cannot be carrying on an “eligible business”. There is evidence that other entities of the Hindmarsh Group may satisfy the definition of eligible business in the Act because they are resulting, or will result, in the development of business links with the international market or the creation or maintenance of employment in Australia: s 134(10) (a) and (b).
44. There is evidence that, during the first phase of construction of Bellerive, 63 people were employed by Hindmarsh and that ongoing employment will be created in the retirement facility itself. It also appears that Hindmarsh may develop further business links in China through Mr Zheng. That does not alter that Mr Zheng’s ownership interest is in a different entity.
45. I have considered whether the relationship between Woden Pty Ltd and Hindmarsh is such that they are effectively the same such that it would be hair-splitting to draw a line for the purpose of Mr Zheng’s application. However, the evidence is clear that they are not. Merely because they are aligned as they are is not sufficient to say that Mr Zheng has the interest required by the Act. He no management role or formal involvement with the other Hindmarsh entities that are involved in the construction and future management of the Bellerive development. Naturally, as an investor, Mr Zheng is keenly interested in Hindmarsh’s activities but merely because he follows them closely does not alter the character of the entity in which he has an interest, or the nature of his involvement with Hindmarsh.
HAS MR ZHENG MADE GENUINE EFFORTS
46. Although I find there is ground for cancelling Mr Zheng’s visa under s 134(1)(a) of the Act, it may not be cancelled so long as he meets each of the “genuine efforts” criteria in s 134(2) because he has:
(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.
47. Section 134(3) provides that the factors which may be taken into account in determining whether a “genuine effort” has been made include:
(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;
(j)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).
48. In Yam v MIMIA [2004] AATA 283 the Tribunal said at [53] that “genuine” in s 134(2) means effort that is more than “superficial or token” and I agree.
49. The difficulty for Mr Zheng is that, while he has taken an active interest in the Bellerive development and the activities of the Hindmarsh Group generally, his ownership interest has been limited to Woden Pty Ltd. It follows that his efforts have not been directed towards an entity carrying on an eligible business.
SHOULD THE RESIDUAL DISCRETION BE EXERCISED IN MR ZHENG’S FAVOUR?
50. The discretion is designed to give the decision-maker flexibility to deal with unanticipated circumstances: Pan and MIAC [2007] AATA 1724 at [24]. Factors that might be taken into account include where the applicant needs more time to complete genuine efforts: Koosasi v Minister for Immigration and Citizenship [2007] AATA 1311.
51. Mr Zheng did not press that this is a case in which the Tribunal should to exercise its residual discretion and I am satisfied that there are no such grounds.
52. The decision under review is affirmed.
I certify that the 52 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Jill Toohey.
Signed: ……[sgd]……..………
Diana Weston, Associate
Date of hearing: 9 April 2010
Date of decision: 15 April 2010Representative for the Applicant: Regina Cheung, solicitor (Johninfo & Associates)
Counsel for the Applicant: Nick Poynder, barrister
Representative for the Respondent: Greg Johnson, solicitor (DLA Phillips Fox)
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