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Federal Court of Australia - Full Court Decisions |
Last Updated: 1 July 2005
FEDERAL COURT OF AUSTRALIA
Cheung v Minister for Immigration & Multicultural & Indigenous Affairs
MIGRATION – Business Skills (Residence) (Class BH)
visa – husband sole proprietor of business - asset held in wife’s
name
but used to secure banking facilities for husband’s business –
whether asset is net asset in qualifying business for
purposes of sub-clause
840.213(2)(a) of Part 840 of Schedule 2 to the Migration Regulations
1994
Migration Regulations
1994
YAU
KEUNG CHEUNG v MIGRATION REVIEW TRIBUNAL and MINISTER FOR IMMIGRATION AND
MULTICULTURAL AND INDIGENOUS AFFAIRS
QUD 12 of 2005
SPENDER, DOWSETT and HELY JJ
1 JULY 2005
BRISBANE
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
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BETWEEN:
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YAU KEUNG CHEUNG
APPELLANT |
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AND:
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MIGRATION REVIEW TRIBUNAL
FIRST RESPONDENT MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS SECOND RESPONDENT |
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DATE OF ORDER:
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WHERE MADE:
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THE COURT ORDERS THAT:
1. The appeal be allowed and the orders of the primary judge of 23 December 2004 set aside.
2. The decision of the Tribunal given on 1 March 2004 affirming the decision of the second respondent’s delegate that the appellant and his family were not entitled to the grant of Business Skills (Residence) (Class BH) visas be set aside, and the matter remitted to the Tribunal for consideration according to law.
3. The second respondent pay the costs of the appellant of the appeal and of the proceedings below.
Note: Settlement and entry
of orders is dealt with in Order 36 of the Federal Court Rules.
ON APPEAL FROM A SINGLE JUDGE OF THE
FEDERAL COURT OF AUSTRALIA
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AND:
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REASONS FOR JUDGMENT
THE COURT:
1 This is an appeal from a judgment of a single judge of the Court given on 23 December 2004 dismissing the appellant’s application for a review of a decision of the first respondent ("the Tribunal") given on 1 March 2004 affirming a decision of the second respondent ("the Minister"), that the appellant and his family were not entitled to the grant of Business Skills (Residence) (Class BH) visas.
2 At issue on the appeal is the proper construction of one of the criteria for the grant of such a visa, namely, sub-clause 840.213(2)(a) of Part 840 of Schedule 2 to the Migration Regulations 1994 ("the Regulations"), and whether the Tribunal properly addressed that criterion as so construed.
3 On 22 July 1999 the appellant and his family applied for Business Skills (Residence) (Class BH) visas. On 7 February 2001 that application was refused by a delegate of the Minister. The appellant then lodged an application for review with the Tribunal on 27 February 2001. On 1 March 2004 the Tribunal affirmed the decision under review.
4 The Business Skills (Residence) (Class BH) Visa was a prescribed class of visa pursuant to reg 2.01 and Schedule of the Regulations. This class of visa was omitted by reg 3 and Schedule 2 of the Migration Amendment Regulation (No 10) 2002 which commenced on 1 March 2003. That circumstance, however, does not affect the appellant’s application or the present appeal.
5 Schedule 1 of the Regulations provided for a subclass of 840 (Business Owner) visas and the appellant was required to meet the criteria for the grant of that visa: see regs 2.02(1), 2.03(1) and 2.04. The criteria were contained in Part 840 of Schedule 2.
6 The Tribunal found that the appellant did not satisfy subclause 840.213(2)(a) of Part 840. The proper construction of that criterion and its application to the circumstances of the appellant and his wife is the crucial issue on this appeal.
7 Subclause 840.213(2)(a) of Part 840 provided:
‘(2) In any 2 periods of 1 fiscal year in the 4 fiscal years immediately preceding the making of the application:
(a) the net assets of:
(i) the applicant; or
(ii) the applicant and his or her spouse together;
in a qualifying business or qualifying businesses were not less than the equivalent of AUD 200,000 in each of those years;
...’
8 The term "qualifying business" is defined in reg 1.03 as meaning:
‘... an enterprise that:
(a) is operated for the purpose of making profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public; and
(b) is not operated primarily or substantially for the purpose of speculative or passive investment.’
9 The appellant contended that the net assets of his wife and himself together in the business "Cheung Lee Hong" in Hong Kong, in the relevant years, exceeded the $200,000 referred to in the relevant criterion. The appellant is the sole proprietor of the business, which is unincorporated.
10 The appellant contended that the net assets of himself and his spouse together in the business "Cheung Lee Hong" included a property located at Flat B, 5th Floor, Block 2, Vantage Park, 22 Conduit Road, Hong Kong ("the Conduit Road property"), which was valued at about AUD 1,316,239 in 1997 and AUD 1,558,763 in 1998. The appellant’s wife is the owner of the leasehold interest in that property. There is a 999-year lease.
11 The Tribunal identified the principal issue as follows:
‘... the essential point to be determined is whether the property referred to as the Conduit Road (or Vantage Park) property is correctly to be categorised as an asset of the business or not.’ (Emphasis added)
12 It was not disputed that if the Conduit Road property was excluded from the calculation of net assets, the criterion in respect of net assets of not less than $200,000 in the 1997 and 1998 fiscal years would not be met.
13 So far as is relevant to the appeal, the Tribunal concluded:
‘55. On the agreed-upon facts of the present case, the visa applicant is not the owner of the property at Conduit Road. His name does not appear on the title. He cannot, on his own initiative, sell it. Conduit Road is not an asset of the visa applicant; therefore it cannot be an asset of a sole proprietorship in the visa applicant’s name.
56. The visa applicant maintains that there is a contractual arrangement between himself and his wife, the latter being the owner of the Conduit Road property, that she will allow the property to be mortgaged, the funds made available to the visa applicant for his business purposes, and the visa applicant to make the mortgage payments as they fall due. Under these circumstances, the wife remains the owner of the property and the financier holds the mortgage, but the visa applicant does not have an ownership interest in the property.
57. The Tribunal finds that the property described herein as the Conduit Road property is not an asset of the sole proprietorship known as CHEUNG LEE HONG. It follows that in the absence of this asset, the value of assets attributable to the business for the financial years 1996, 1997, 1998 falls below $A 200,000. The Tribunal finds that the visa applicant does not meet the requirements of subclause 840.213(2)(a) as amended.’
14 In these reasons it is plain that the Tribunal was concerned solely with the question of whether the Conduit Road property was an asset of the appellant: ‘... Conduit Road is not an asset of the visa applicant; therefore it cannot be asset of a sole proprietorship in the visa applicant’s name; ... the visa applicant does not have an ownership interest in the property; ... the Conduit Road property is not an asset of the sole proprietorship known as CHEUNG LEE HONG.’
15 The Tribunal did not consider whether the net assets of the appellant and his wife together in the qualifying business were greater than the equivalent of AUD 200,000.
16 The primary judge, so far as is relevant to the issues on the appeal, found as follows:
‘25. Clause 840.213(2)(a) has application to businesses such as those conducted by sole traders, in partnership or through a private company. It requires the identification of the assets of the qualifying business and the extent of an applicant’s interest in those assets gleaned by reference to the nature and extent of their interest in the business itself or its assets. In the case of a sole trader, as was the case here, an applicant’s interest in the assets of the business will be in the whole of them.
...
29. Property owned by a sole trader might be used to provide security in financing a business, but that does not convert it to a business asset. I understood the Tribunal to be saying as much. A business asset is one used in and for the purposes of the enterprise. In that regard I note that the definition of a ‘qualifying business’ would exclude those which involve only ‘passive investments’ which would include the mere holding of property. No error of law is disclosed in the Tribunal’s conclusion.
30. The last ground, which has regard to the applicant’s wife’s interest in the property, faces two insurmountable hurdles. The Tribunal was not obliged to conclude that the property was a business asset. And if it were an asset of the business, the applicant’s wife could not be shown to have any interest in the business.’
17 The appellant’s complaint is that the Tribunal, having found that the Conduit Road property was an asset of the appellant’s wife and not the appellant’s asset, did not then proceed to ask whether the Conduit Road property was an asset of the appellant’s wife ‘in a qualifying business’ and whether the appellant and his wife together had assets of at least AUD 200,000 in the 1997 and 1998 fiscal years. This enquiry, it was submitted, was one which the Tribunal was required to undertake by the terms of subclause 840.213(2)(a).
18 It was also submitted before the primary judge that the Tribunal had erred in construing subclause 840.213(2)(a) as if that criterion required the assets to be ‘assets of the business’ or ‘business assets’. The primary judge had rejected that argument in the finding in par 30 of her Honour’s reasons for judgment set out above.
19 It was contended by Mr Peter Bickford, counsel for the Minister, that the contentions of the appellant were not put to the Tribunal: the issue that was put was that, notwithstanding the wife was the legal owner of the Conduit Road property, it was an asset of the appellant in the business.
20 It was common ground that the wife was the legal owner of the Conduit Road property, but it was still asserted that the property was being used in the business. That plainly raised the question of whether the net assets of the husband and wife together in the business exceeded the monetary amount in the relevant years.
21 During the hearing of the appeal Mr Bickford conceded that for the purposes of subcl 840.213(2)(a):
۰ assets of the wife may be used in the husband’s business; ۰ this is so whether the assets are jointly owned by the wife and her husband or solely owned by her; ۰ such assets are to be taken into account for the purposes of that sub-clause.
It was also conceded that the only question for determination in these proceedings is whether or not the wife’s house is used in the husband’s business.
22 In the light of those concessions, it is clear that the Tribunal’s reasoning in par 55, set out above, is erroneous. The Tribunal concluded that because the Conduit Road property was not an asset of the applicant, it could not be an asset in the business.
23 In the application to the Department of Immigration and Multicultural Affairs for a visa in class 840 on behalf of Mr Cheung and his family, Messrs Tan and Tan, Migration Agents, on 15 July 1999 wrote to the Department enclosing an application on the departmental form 1029 and other supporting documents, as well as two cheques totalling $3100.00 payable to DIMA (as it then was). In respect of the item 840.213(2), that item was set out and the letter said:
‘The net assets of the Applicant and his spouse is in excess of A$1.5 million at all times.’
24 In the form 1029, being a departmental form for an application for Business Skills (Residence) visa, question 63 provided as follows:
‘63. Provide the value of your net assets in business in local currency (LC) and in Australian dollars (AUD) for the best 2 of the last 4 years
Note: If you have net assets in more than one business, please photocopy this page and provide separate pages for each business
Business name Cheung Lee Hong
Year 19 97 Year 19 98
(1) Net assets of the business
Net assets = total assets of business
minus total liabilities of the business.
This is equivalent to owners equity LC 6,440,270 HK LC 6,821,749 HK
(2) Total percentage of the business owned
by you, or you and your spouse 100 % 100 %
(3) Ownership share
of you, or you and your spouse, in
the business (1) x (2) LC 6,440,270 HK LC 6,821,749 HK
ADD
(4) Balance of loans
advanced to the business by you,
or you and your spouse LC 3,500,000 HK LC 3,500,000 HK
LESS
(5) Balance of loans
advanced to you, or you and your spouse,
by the business LC Nil LC Nil
LESS
(6) Balance of loans
advanced to you, or you and your
spouse, to finance your investment
in the business LC Nil LC Nil
Net assets of you, or you and your spouse,
In the business (3) + (4) – (5) – (6) LC 9,440,270 HK LC 10,321,749 HK
AUD $1,641,786.00 AUD $2,243,858.00
Exchange rate(s) used
Use exchange rates current at the end of
each fiscal year 5.75 LC = 1 AUD 4.60 LC = 1 AUD’
25 In that form the claim was made that the ‘Net assets of you, or you and your spouse, in the business’ were in amounts the equivalent of AUD 1,641,786 for the 1997 year and AUD 2,243,858 in the 1998 year.
26 In the balance sheet as at 31.3.1997 for "Mr Cheung Yau Keung trading as Cheung Lee Hong", supplied in support of his application by Right Point Accountancy Ltd. Hong Kong, and dated 3 July 1997, the fixed assets are shown as totalling HK$ 10,612,901. That is the subject of Note 1 to the balance sheet. The liabilities include:
‘Mortgage loan 1,730,327
Bank overdraft 509,436
Bills payable 3,520,461’
27 The notes to the financial statements relevantly show as follows:
‘1. FIXED ASSETS
At cost/
Market value*
HK$
(A) Leasehold properties:
(i) Flat G, 32/F., Block 1, Tsuen Kam Centre,
Tsuen Wan, N.T. (in name of proprietor &
his wife 2,500,000*
(ii) Flat B, 5/F., Block 2 & Car Park No. L9 on
Level 9, Vantage Park, 22 Conduit Road,
Hong Kong. (in name of proprietor’s wife) 8,000,000*
10,500,000
(B) Furniture & equipment 112,901
10,612,901
2. STOCK-IN TRADE
Stocks are stated at the lower of cost and net realisable value.
3. PLEDGE OF FIXED ASSETS
The leasehold properties as stated in Note (1)(A)(i) and (ii) were pledged to Nanyang Commercial Bank Ltd. for general banking facilities amounting to HK$7,900,000 granted to the Company.’
28 In addition, there is in evidence a letter dated 23 December 1997 from Nanyang Commercial Bank Ltd addressed to:
‘Cheung Lee Hong,
Room 2101, 21/F., Workingview Comm Bldg.,
21 Yiu Wa Street,
Causeway Bay,
Hong Kong.
Dear Sirs,
Re: Banking Facilities
We are pleased to inform you that banking facilities available to your company have been revised as follows:
Facilities Limit (HKD) Period/Expiry date
Overdraft secured 2,000,000.00 1998-07-31
Letter of credit 6,500,000.00 1998-07-31
(sub limit of Trust)
Receipt tenor up to
90 days) 6,500,000.00 1998-07-31
Back to Back L/C 10,000,000.00 1998-07-31
Mortgage Loans 2,500,000.00 2001-06-23
Collateral Security and other conditions:
- An Unlimited "All Monies" legal charge on the following properties to secure general banking facilities from time to time and at any time granted or to be granted by us to you to such extent as we may from time to time deem fit.
1) Flat B, 5/F., Block 2, & CPS No. L9 on level 9, Vantage Park. No. 47, 47A, 47B, 47C, 49 & 49A Robinson Road and No. 22 Conduit Road, Hong Kong.
2) Flat C5, 18/F., Greenwood Garden, 7-11 Sha Kok Street, Shatin, N.T.
3) Flt C, 12/F., Tower 1, The Floridian, 18 Sai Wan Terrace, Quarry Bay, H.K.
...’
29 The security for the facilities made available to the business Cheung Lee Hong of the appellant by Nanyang Commercial Bank Ltd include an unlimited "All Monies" legal charge on the Conduit Road property. It is apparent from the financial statements that very substantial sums were advanced by the bank for the use by the appellant in his business; sums which were secured by the charge, unlimited as to amount, over the Conduit Road property owned by the appellant’s wife.
30 The Tribunal’s reasons record the contention advanced by the appellant before it, in par 56 of its reasons:
‘56. The visa applicant maintains that there is a contractual arrangement between himself and his wife, the latter being the owner of the Conduit Road property, that she will allow the property to be mortgaged, the funds made available to the visa applicant for his business purposes, and the visa applicant to make the mortgage payments as they fall due. ...’
The Tribunal answered this contention by stating:
‘ ... Under these circumstances, the wife remains the owner of the property and the financier holds the mortgage, but the visa applicant does not have an ownership interest in the property.
57. The Tribunal finds that the property described herein as the Conduit Road property is not an asset of the sole proprietorship known as CHEUNG LEE HONG. ...’
31 In our judgment, the Tribunal proceeded on the basis that the property being in the wife’s name was a disqualifying factor. It was conceded by Mr Bickford, in the course of submissions, that: ‘... the fact that it’s in the wife’s name is not of itself a disqualifying fact, no.’ The Tribunal proceeded on an erroneous basis, because of its misunderstanding of the crucial criterion 840.213.
32 The primary judge noted in her reasons:
‘... A business asset is one used in and for the purposes of the enterprise....’
33 The conclusion of the primary judge in par 30 of the reasons set out earlier was that if the Conduit Road property were an asset of the business, the applicant spouse could not be shown to have any interest in the business. It is not, however, a requirement of the sub-clause that the appellant’s spouse have an interest in the business, merely that she have an asset in the business. The conclusion expressed by the primary judge involves questions of fact which were not decided by the Tribunal.
34 In light of the evidence that the Conduit Road property owned by the wife was used to secure an overdraft, letters of credit and other banking facilities for the appellant’s trading activities, it is arguable that the Conduit Road property was used in the business. The Tribunal did not consider, or rule upon this issue, as it was obliged to do. It was conceded by counsel for the Minister that if this is what the Tribunal failed to do, it made an error in the exercise of the jurisdiction conferred by the Act.
35 For the above reasons, the appeal should be allowed and the orders of the primary judge of 23 December 2004 set aside. The decision of the Tribunal given on 1 March 2004 affirming the decision of the second respondent’s delegate that the appellant and his family were not entitled to the grant of Business Skills (Residence) (Class BH) visas is set aside and the matter remitted to the Tribunal for consideration according to law. The second respondent should pay the costs of the appellant of the appeal and of the proceedings below.
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I certify that the preceding thirty-five (35) numbered paragraphs are a
true copy of the Reasons for Judgment herein of the Honourable
Justices Spender,
Dowsett and Hely
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Associate:
Dated: 1 July 2005
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Counsel for the Appellant:
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Mr Darryl Rangiah
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Solicitor for the Appellant:
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Redmond Van de Graaff Solicitors
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Counsel for the 1st & 2nd Respondents:
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Mr Peter Bickford
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Solicitor for the 1st & 2nd Respondents:
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Clayton Utz
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Date of Hearing:
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18 May 2005
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Date of Judgment:
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1 July 2005
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