IMMIGRATION - decision under review concerning cancellation of business skills (migrant) subclass 127 Visa to Applicant and his family - consideration of whether Applicant satisfies elements of section 134 of the Migration Act 1958 - decisions under review are affirmed.

Migration Act 1958 section 134

Re Wuang and Minister for Immigration and Multicultural and Indigenous Affairs (2002) AATA 656

Re Ng and Minister for Immigration and Multicultural and Indigenous Affairs (2003) AATA 299

This is an Application by Mr Lip Tek Ho ("the Applicant") seeking review by the Tribunal of a decision made by a delegate of the Minister for Immigration and Multicultural and Indigenous Affairs ("the Respondent") on 23 December 2004.

By such decision the Respondent pursuant to section 134 of the Migration Act 1958 ("the Act") cancelled the business skills (migrant) subclass 127 visa previously granted to the Applicant. The cancellation also had the effect of cancelling the visas that had been granted to his wife, son and daughter.

It is maintained by the Respondent that:

•

The Applicant had not obtained a substantial ownership interest in an eligible business in Australia (section 134(1)(a) of the Act);

•

The Applicant was not utilising his skills in actively participating at a senior level in the day-to-day management of an eligible business in Australia (section 134(1)(b) of the Act);

•

The Applicant had not at the relevant time made genuine efforts to obtain a substantial ownership interest in an eligible business and/or to utilise his skills in actively participating at a senior level in the day-to-day management of an eligible business;

•

The residual discretion should not be exercised in favour of the Applicant.

On behalf of the Applicant it is maintained that he has established an ownership interest in a relevant business in Australia and is using his business skills in the day-to-day management of such business. Alternatively, it is contended that his conduct is such as to show a genuine intent to establish and continue in his efforts to establish an eligible business and there are reasonable prospects of his doing so.

There is no issue raised on behalf of the Applicant that in the event of the decision under review referable to him being affirmed that the visas of his wife and children should remain also cancelled.

At the hearing of the Application, the Applicant was represented by Mr Ray Turner, solicitor and the Respondent by Mr Cox, solicitor of Phillips Fox, Lawyers.

The documents lodged by the Respondent with the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") were admitted into evidence and marked T1 to T22, ST1 to ST3. Other documentary material tendered on behalf of the Applicant was also admitted and marked as exhibits, namely:

" A: ASIC Company Details - Form

B: Certificate of Registration of a Company

C: Outline of Evidence - Lip Tek Ho

D: Financial Statements - year ended 30/6/04

E: Financial Statements

F: Outline of Evidence - Clement Djaja

G: Bundle of Documents (Invoices)"

Oral evidence was given by the Applicant through an interpreter and by Mr Djaja upon which they were each cross examined.

The provisions of the Act relevant to this application are:

(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

(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.

(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.

(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)."

The Migration Series Instructions - 131: Visa Cancellation under subdivision G - Cancellation of Business Visas ("MSI-131") provides guidance as to whether a genuine effort has been made for statutory purpose. As stated under 4.5 in MSI-133 the factors to be considered in determining whether a genuine effort has been made within the meaning of the Act are:

"(a) business proposal which is considered genuine, realistic and achievable;

(b) formal contract with partners or joint venturers;

(c) written evidence of detailed consultations with at least three business advisers (accountant, lawyer, bank/financial institution, State/Territory government business development office, Austrade, business/trade association);

(d) physical presence in Australia for more than six months since first arrival as a Business Skills class migrant;

(e) transferred to, and retained in, Australia at least 50% of the funds indicated as available for transfer within two years (under Factor 4 of the Business Skills Points test);

(f) minimum A$100,000 or 10% ownership previously held by the person. If the person is no longer in business, the reasons for loss of ownership are also relevant.

(g) minimum A$100,000 business activity as indicated by turnover. This may include other business activity not considered "eligible business" but cannot include passive investment, eg. Purchase of shares.

(h) failure to comply with a notice for information under s 137, ie mandatory monitoring of Australian address and return of survey forms."

The Applicant and his wife, Binawati Kusmin have carried on business in Indonesia for many years. The Applicant through companies Panca Wesesa Adhika and Gita Putra Abadi and his wife through a firm or company Dina Flora. So far as is relevant to these reasons, the first two business entities have been involved in the marketing in Indonesia of bathroom accessories over a period of twenty-five years and the third entity of flowers over the last eight years. Detailed particulars of ownership of the entities in Indonesia is uncertain and not overly relevant to these reasons. Suffice it to say that both husband and wife have substantial ownership interests with others and that they are each involved in the day-to-day activities in Indonesia of the business entities.

The Applicant applied to the Respondent for a subclass 127 business visa on 22 July 1999, which visa was granted to him on 10 August 2001. On 10 January 2002, two companies; Cornerstone Victory Trading Pty Limited ("Trading") and Cornerstone Victory Properties Pty Limited ("Properties") were registered in New South Wales under the Corporations Act 2001 (Exhibit B, T 538). The initial director and secretary of Trading was Mr Clement Djaja. The Applicant and a Mr Handajanti were appointed directors on 3 June 2003 (Exhibit A). The issued capital of Trading was 100 fully paid shares.

With reference to Properties, on its registration Mr Djaja, the Applicant, his wife, Mr Handajanti and another were appointed directors and Mr Djaja as secretary. On 19 February 2002, Mr Ling was also appointed a director.

The Applicant, his wife, Mr Handajanti and the other director resigned on 4 March 2002. The Applicant and Mr Handajanti were reappointed on 3 June 2002 but again resigned on 15 April 2004. Of the issued capital of 100 shares, the Applicant and his wife hold 45 shares, Mr Handajanti 40 shares and Mr Djaja 10 shares. Five shares are held by the other initial director who resigned on 4 March 2002. The current directors are Mr Djaja and Mr Ling.

From its inception, Properties was intended to be involved in real estate activities. It acquired properties in May 2002 and October 2002, one of which it sold in July 2004 and the other in June 2005. In April 2005, it acquired a 25 per cent interest in Bioceutics International Pty Limited ("Bioceutics") and in June 2005, an interest in a property in Perth, Western Australia.

The profit and loss statement of Properties for the period ending 30 June 2002 shows a loss of $17,230 (T 545) with payments by way of consultant's fees to JLM Services Pty Limited and Bioceutics. Its balance sheet showed substantial borrowings by way of current liabilities namely shareholders loans of $363,563 and non-current bank liabilities of $544,153. The profit and loss statement for the period ending 30 June 2003 showed a loss of $49,153 with payments by way of consultant's fees of $20,607 to JLM Services Pty Limited. The borrowings had increased to $1,281,001, with additional funds being largely provided by way of shareholders' loan money ($570,728 (T 565)). The financial statement for the 2004 year did not disclose any sale of real estate, but a holding or "closing stock of real estate" of $1,340,279 (Exhibit D) and consultancy fees again to JLM Services Pty Limited of $7,518. A loss of $14,655 is recorded. Bank borrowings had increased to $739,203 and shareholders' loans to $622,334. Monies had also been lent to the company by A Djaja and C Djaja and by Bioceutics International Pty Limited.

Although there has been little commercial activity by Properties, the Applicant said that he intended "to organise the development of property", "to renovate property" and that any decisions to develop will be made by him "with input from Clement Djaja". This even be it, he is not an officeholder of the company or an employee. He is however a substantial investor/creditor.

Since at or about the time of its incorporation, Trading has been exclusively concerned with the export from Australia into Indonesia of bathroom accessories and flowers and more recently, only flowers. In the 2003 year, sales of $35,008 were recorded for bathroom accessories and $75,469 for flowers and accessories. Bathroom accessories were provided by a company Stegbar but on order from P. T. Panca Wisesa Adleka ("Panca") in Indonesia. The goods were invoiced by Stegbar to Trading, which company effected payment but shipped by Stegbar direct to the Indonesian company. Trading invoiced the Indonesian company at cost plus 10 per cent. As with the bathroom accessories, so with the flowers. The Indonesian company placed orders direct (a copy of the invoice being sent to Trading) with the supplier Collina Export in Melbourne ("Collina"). The flowers were invoiced by Collina to Trading, which company effected payment. The flowers were shipped by Collina direct to the Indonesian company in Jakarta. Trading invoiced the Indonesian company at cost plus 10 per cent.

The Applicant said that goods imported into Indonesia are marketed in three ways: by retail through a shop, by dealers and through special projects. The flowers are imported by the company owned by the Applicant's wife even be it, the Applicant places the orders "for what the customers want" because it is he who "does the marketing in Jakarta". As he also put it, "my role is to promote the sale of goods in Jakarta. I was never a director or employee of [Trading], my involvement is in marketing".

Mr Djaja, the director and secretary, is resident in Sydney. When asked as to why the transactions were organised in the above manner, both the Applicant and Mr Djaja said that it was in order for local control to be had over payment and quality control of deliveries. Trading is thus "a vehicle for handling complaints". The Indonesian company forwarded monies to Trading sufficient to enable the invoices from Collina to be met on a regular basis.

The 2004 financial statements of Trading (Exhibit E) show only an involvement in the purchase and sale of flowers and accessories only ($70,024) resulting in a gross profit of $6,361 (10 per cent of the cost of sales). Expenses reduced the net profit to $2,544. The expenses included salaries, $250 and consulting fees, $500. In the case of Properties, the 2004 financial statement showed salaries of $8,346 and consultancy fees of $7,517 with no income earning activity other than the purchase of the one property in Perth and receipt of rental income. Shareholders' loan had been reduced from $21,100 to $7,350.

No financial statements as to the 2005 year were tendered in evidence.

The Applicant claims that both Properties and Trading are managed by Mr Djaja, but under his supervision and direction (Exhibit C) with "no significant decisions" being made "without my approval". He says that he identifies the markets for products in Indonesia, advises on quantities and varieties to be ordered and distributes the products in Indonesia. More specifically, the Indonesian company handled the bathroom accessories and Dina Flora, the Applicant's wife's firm, handles the flowers. Orders are obtained for the flowers in Indonesia and transmitted to Collina.

Financial statements referable to the position at 30 June 2003 of two other companies; Cornerstone OH Properties Pty Limited and Cornerstone Darvall Properties Pty Limited were included in the T documents (T 653 and T 663). There was not any evidence as to the involvement of the Applicant in the activities of either company. Nor is there any evidence of his involvement in the activities of Bioceutics, an online retailer of health supplements, other than the investment earlier mentioned and the evidence of Mr Djaja that the Applicant "is working hard to break into the Indonesian market". Mr Djaja is the owner of the remaining 75 per cent interest in this company.

The Applicant has spent only 25 days in Australia since he was granted the business visa and has not been in the country since July 2003. The Applicant's wife has not been in Australia since May 2003 and the two children, since September 2001. When asked his intentions so far as living in Australia were concerned, the Applicant said that his "profile was to network for marketing to Indonesia and other Asian countries". Whilst intending to move with his family to Australia "if possible, he had his business in Indonesia to manage and "a child still studying in America".

It was maintained on behalf of the Respondent that Properties was not a business in the relevant sense. It was purely an investment vehicle and it did not have an element of continuity or repetition. It was not carrying on a business in that it was not a going concern with activities engaged in for the purpose of profit or a continuous and repetitive basis. This is true. Properties has received loan monies which it has invested in three pieces of real estate over three years. There is not any evidence of a business involvement or activity. The Applicant was not an executive or officer of the company, but an investor from Indonesia. Employment had not been offered to Australian citizens or residents, the payment of consultancy fees not evidencing this prerequisite. No significant sum was paid by way of a salary to a director. There were or are no employment agreements. Whilst initially holding shares in the issued capital of Properties, the Applicant does not now have a substantial ownership interest in the company.

The Applicant's involvement in Properties is of an investment nature and by way of loan monies. He is no longer a director. So far as Properties is concerned, the Applicant does not have a substantial ownership interest in an eligible business. Nor does the Applicant utilise his skills in actively participating at a senior level in the day-to-day management of Properties. It has over the period of its incorporation only acquired and sold the abovementioned real estate. There is not any evidence of his participation in any significant business decision or decision-making process. There is not any evidence of the Applicant actively playing a part in the management of the business of Properties, limited as it is, nor of his making a genuine effort to obtain a substantial interest or appropriately and relevantly use his skills in management.

With reference to Trading, the Applicant was actively involved in the placing of bathroom accessory orders with Stegbar and was and is involved in the placing of flower and accessory orders with Collina, but the orders were and are placed from Jakarta. The utilisation of Trading is primarily to effect payment and the ability to ensure correct deliveries to Indonesia. Any management by the Applicant is from Indonesia. He acts on behalf of the Indonesian company in obtaining orders for flowers in Indonesia. The business activity in Australia so far as the export/import of flowers is concerned is only to effectuate delivery to Jakarta and to ensure prompt payment. The activities of Trading are no more than those of an agency. No significant independent decisions are made. Orders are placed from Jakarta, payment is arranged from Jakarta and the goods are dispatched by the supplier Collina direct to Jakarta.

It is not Trading that seeks to obtain and export the flowers, but the Indonesian company. A primary reason for the interposition of Trading is to handle any complaints that might arise between the supplier and the Applicant's or the Applicant's wife's company in Jakarta, the company causes the goods to be exported. Trading is merely a convenient vehicle and any decisions referable to payment or supply, being the only relevant management decisions to be made, are handled by Mr Djaja not the Applicant.

It may well be that the Applicant is using his skills and contacts to obtain orders for flowers in Indonesia, but these efforts are made on behalf of the company in Jakarta, which then places the orders with Collina. There is not a day-to-day management in Australia by the Applicant of the business of the company.

The Applicant has not exhibited an intent to reside in Australia. His wife and children are not in this country. He has spent only 25 days here since his original application. He has played no relevant part in the management of the affairs of either company in Australia.

There was not any evidence tendered as at the date of the decision under review (23 December 2004) that would enable the Tribunal to make findings as to the Applicant's activity, if any, in connection with Bioceutics.

As was noted in Re Wuang and Minister for Immigration and Multicultural and Indigenous Affairs (2002) AATA 656:

"The relevant legislation ... is directed towards overseas people who wish to use their business skills to establish a significant business in Australia with a view to providing employment opportunities for Australians, export markets for Australian goods and introducing new technology to Australia ... a business skills visa is designed to allow the overseas business person to travel to and from Australia and to live in Australia while conducting the business. It envisages that the holder of such a visa will acquire a significant interest in the Australian company and play a significant role in the day-to-day management of the company. It also envisages that the business person will probably wish to have close family members accompanying them while they live in Australia ... not only must the eligible business operate in Australia to comply with the Act the visa holder must participate at a senior level in the day-to-day management of the Australian business in Australia ... ."

I agree with this statement as to the legislative intent.

The Applicant was and is carrying on business in Indonesia, not in Australia. As in Wuang the "act of ordering Australian goods from a base [in Indonesia] does not constitute the management of a business in Australia".

It is the business activities of the Applicant in Australia that are to be examined and that are relevant. His business activities whilst residing in Indonesia do not bear upon his management or non-management of any business in Australia. In Re Ng and Minister for Immigration and Multicultural and Indigenous Affairs (2003) AATA 299, it was said,

"... the act does not contemplate an absentee entrepreneur directing operations from afar. Direct "hands on" involvement within the Commonwealth of Australia is essential. ... it would be strange indeed if an overseas entrepreneur could secure these advantages by directing business operations from abroad ... ."

Mr Ho clearly directed any relevant business operations from Indonesia.

The power to cancel a visa under sub-section 134(1) is discretionary (Kim v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 31). This is a discretion not to exercise the power to cancel a business visa even in the event that the criteria set out in paragraphs 134(1)(a) to (c) are not satisfied.

On a consideration of the factual material as set forth in these reasons, I do not consider that the Applicant is likely in the future to satisfy the criteria in sub-section 134(1).

As noted on behalf of the Respondent in its submissions to the Tribunal, the Migration Regulations 1994, Schedule 2, Clause 127.216 require that at the time of application:

"The Applicant genuinely has a realistic commitment after entry to Australia as the holder of a subclass 127 visa:

(i) establish an eligible business in Australian; or

(ii) participate in an existing eligible business in Australia; and

(b) to maintain a substantial ownership interest in that business; and

(c) to maintain direct and continuous involvement in management of that business from day-to-day and in making decisions that affect the overall direction and performance of the business in a manner that benefits the Australian economy."

A consideration of the above clause underlying as it does the legislative scheme is relevant to the exercise of the discretion. I am not satisfied that the Applicant wished or wishes to use his business skills to establish a significant business in Australia, to provide employment opportunities for Australians or introduce new technology. I am not satisfied that the Applicant intended or intends to live in Australia while conducting the business. I am satisfied that the Applicant in effect is an absentee businessman directing operations to the extent that any directions are necessary or have been given, from Indonesia. He does not have a "hands on" involvement within Australia.

It was submitted on behalf of the Respondent that the Act evidences an intention that business skill visas be available to persons who intend to immigrate to Australia for the purposes of establishing or participating in an eligible business and to allow such persons to maintain direct and continuous involvement in the day-to-day management of that business within Australia. The Tribunal agrees with this submission. It is clearly inconsistent with the legislative intent for there to be a grant of a business skills visa to a person who does not intend to actively manage a business and conduct business activities in Australia. The Tribunal is satisfied that the Applicant has not demonstrated a genuine and realistic commitment to act in accordance with the regulations. It would be contrary to the legislation governing business skills visas to allow the subject visa to remain in operation.

The Tribunal is satisfied that the Applicant has failed to obtain a substantial ownership interest in an eligible business in Australia and failed to utilise his skills in actively participating at a senior level in the day-to-day management of an eligible business. He has not demonstrated a genuine effort to achieve these requirements.

The Tribunal in the exercise of its discretion and taking into account all relevant factors finds that the decisions under review should be affirmed. There was not any evidence placed before the Tribunal of relevant hardship that might be experienced by members of the Applicant's family in the event of the Business Visa being cancelled. The decisions referable to cancellation of the visas are affirmed.

I certify that the 42 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Purvis

Signed: Associate

Dates of Hearing 18 and 19 October 2005

Date of Decision 19 December 2005