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Howard and Minister for Immigration and Citizenship [2010] AATA 989 (9 December 2010)

Last Updated: 13 December 2010

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 989

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2010/1350

GENERAL ADMINISTRATIVE DIVISION
)

Re
NIGEL STEPHEN HOWARD

Applicant
And
MINISTER FOR IMMIGRATION AND CITIZENSHIP

Respondent


And CHERYL SUSAN HOWARD


Other Party

DECISION

Tribunal
Senior Member R W Dunne

Date 9 December 2010

Place Adelaide

Decision
The Tribunal affirms the decision under review.

..............................................
R W DUNNE
(Senior Member)

CATCHWORDS

IMMIGRATION AND CITIZENSHIP – business talent visas cancellation – eligible business – substantial ownership interest in eligible business – utilising skills in actively participating at a senior level in the day-to-day management of the business – whether genuine effort made to comply with visa conditions – residual discretion not to cancel visa – extreme hardship – decision under review affirmed

Migration Act 1958 (Cth) ss 134(1), 134(2), 134(3), 134(4), 134(5), 134(10)

Migration Regulations 1994
Kim v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 31
Re Song and Minister for Immigration and Citizenship [2010] AATA 461
Re Li and Minister for Immigration and Citizenship [2009] AATA 501
Hope v Bathhurst City Council [1980] HCA 16; (1980) 144 CLR 1
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Hneidi v Minister for Immigration and Citizenship [2010] FCAFC 20; (2010) 182 FCR 115
Re Leo v Minister for Immigration and Multicultural and Indigenous Affairs [2006] AATA 309 Evans v FC of T [1989] FCA 205; (1989) 89 ATC 4540
Puzey v Commissioner of Taxation [2003] FCAFC 197; (2003) 131 FCR 244
Re Yam and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 283
Re Abbu and Minister for Immigration and Multicultural Affairs [2006] AATA 898
Re Koosasi and Minister for Immigration and Multicultural Affairs [2006] AATA 179
Re Gunawan and Minister for Immigration and Multicultural Affairs [2006] AATA 852
Man Ki Kim v Minister for Immigration and Ethnic Affairs [1995] FCA 1088; (1995) 37 ALD 481
Re Wang and Minister for Immigration and Multicultural Affairs [2000] AATA 961
Re Salim and Ors and Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 899


REASONS FOR DECISION


9 December 2010
Senior Member R W Dunne

INTRODUCTION

  1. On 1 June 2006, Nigel Stephen Howard (“first applicant”) was granted a Subclass 132 (Business Talent) visa under the Migration Act 1958 (“Act”). His wife, Cheryl Susan Howard (“second applicant”) was also granted a Subclass 132 visa under the Act on the basis of being a member of his family unit. On 26 March 2010, a delegate of the respondent decided to cancel the visas of both Mr Howard and Mrs Howard. On 7 April 2010, Mr Howard applied for review of the decision of the respondent’s delegate and on 16 April 2010 the Tribunal ordered that Mrs Howard be made a party to the proceedings.
  2. At the hearing, Mr and Mrs Howard both gave evidence and were represented by Richard Glazbrook, a registered migration agent. The respondent was represented by Mr P d’Assumpcao from the office of the Australian Government Solicitor. I received into evidence the T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Exhibit R1), together with the following exhibits:

ISSUES BEFORE THE TRIBUNAL

  1. The issues before the Tribunal are as follows:

(a) Should the first applicant’s Subclass 132 (Business Talent) visa be cancelled pursuant to s 134(1) of the Act?

(b) If the first applicant’s Subclass 132 (Business Talent) visa is cancelled pursuant to s 134(1), should the second applicant’s Subclass 132 (Business Talent) visa be cancelled pursuant to ss 134(4) and 134(5) of the Act?

RELEVANT LEGISLATION

  1. In this matter, the respondent exercised the discretionary power conferred by s 134(1) of the Act to cancel the applicant’s business visa. The relevant provisions concerning the respondent’s cancellation power are more fully set out in s 134 as follows:
“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.
(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).
...
(4) Subject to subsection (5) and to section 135, if:
(a) the Minister cancels a person’s business visa under subsection (1) or (3A); and
(b) a business visa is held by another person who is or was a member of the family unit of the holder of the cancelled visa; and
(c) the other person would not have held that business visa if he or she had never been a member of the family unit of the holder of the cancelled visa;
the Minister must cancel the other person’s business permit or business visa by giving written notice to that person.
(5) The Minister must not cancel the other person’s business visa under subsection (4) if the cancellation of that visa would result in extreme hardship to the person.
...
(10) In this section:
business visa means:
(a) a visa included in a class of visas, being a class that:
(i) has the words “Business Skills” in its title; and
(ii) is prescribed for the purposes of this paragraph; or
(b) a visa:
(i) to which a prescribed provision of the Migration Reform (Transitional Provisions) Regulations applies; and
(ii) that is of a kind prescribed for the purposes of this paragraph; or
(c) a return visa that is granted to a person who is or was the holder of a business permit or business visa;
that is or was granted on or after 17 February 1992.
...
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.
...
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.
...”

  1. The respondent accepts that the Tribunal has a residual discretion not to cancel an applicant’s visa, even if he has not fulfilled the requirements of s 134(1) and s 134(2) of the Act: Kim v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 31.

BACKGROUND AND EVIDENCE

  1. Mr Howard entered Australia as the holder of the visa on 4 December 2006. According to the respondent’s records, he has visited Australia on six occasions since that time, spending a total of 407 days (or approximately 13 months) in Australia. On 9 January 2009, in his written response to a 24 month survey, Mr Howard has advised:

(a) that he has spent only six months in Australia since 2006 due to his involvement as the managing director of a company called On-Set Location Services Limited in the United Kingdom;

(b) that both he and Mrs Howard intended to move to Australia permanently within six months;

(c) that in August 2007, he established a property management company in Australia called First Step Rentals Pty Ltd (“First Step Rentals”). The company operated two properties in Dover Gardens in South Australia, renting out short-term furnished accommodation for holiday-makers and new migrants arriving in Adelaide;

(d) that he runs First Step Rentals from his office in the United Kingdom on a day-to-day basis handling all inquiries and bookings via email and employs one person in Adelaide to take care of maintenance, cleaning and accounting;

(e) that he has transferred approximately $1.7 million which has been invested in properties in Australia;

(f) that he intended to return to Adelaide in February 2009 to establish a construction company to run alongside First Step Rentals as phase two of his relocation to Australia. The company will provide up to five additional employment positions; and

(g) that he will have an additional $2-2.5 million to transfer to Australia from the sale of assets in the United Kingdom when he moves to Australia permanently with his wife.

  1. In the 24 month survey itself, which was completed by his wife, Mr Howard:

(a) stated that one family member is employed full-time in the business;

(b) stated that one other person is employed part-time in the business;

(c) did not answer the question related to how many hours he usually works each week in the business; and

(d) stated that he has transferred $1,703,058 in funds to Australia and $30,000 in personal effects.

  1. In subsequent responses to communications from the respondent, Mr Howard has advised through chartered accountants and migration agents:

(a) that First Step Rentals is the trustee of the “Howard Family Trust”;

(b) that he attends to the technical and hands-on issues in First Step Rentals, while Mrs Howard attends to the secretarial duties;

(c) that he purchased the Dover Gardens properties, with a cost of approximately $400,000 each, and then invested a further $12,000 in improving the properties;

(d) that the accommodation in the properties is booked out for the whole year in advance;

(e) that he purchased another property at Seacombe Heights in South Australia for $900,000, and was spending a further $300,000 on renovations;

(f) that he did not realise it was a Departmental requirement to lease the Dover Gardens properties to tenants through First Step Rentals;

(g) that the business is not a passive investment, but is an active and profitable operation.

  1. It was Mr Howard’s evidence that his initial plan was to migrate to Western Australia, but he eventually settled in South Australia. In business, his specialty was specialist transport. However, he found a lot of new migrants arriving in South Australia and there was no short-term accommodation for these people when they first arrived. There was a good opportunity to establish such short-term accommodation in a business that could be run from both Australia and the United Kingdom.
  2. With the cancellation of his visa by the respondent, the running of Mr Howard’s business has been put on hold. He received no specific instructions from the respondent on how he should establish an eligible business. He arranged to have First Step Rentals incorporated and was an equal shareholder in the company, with his wife. He purchased two properties for rental and spent additional monies on improvements to the properties. He arranged for a website to be set up advertising First Step Rentals and the properties that were available at Dover Gardens for rental. The properties became too expensive for the rental inquiries he was receiving and land at Seacombe Heights was purchased with the intention of building an executive home on the land for himself and his wife. They then searched for other land to build four small units to put on the market for a reduced rental, to attract more tenants. The Seacombe Heights home was commenced in November 2007, was worked on by Mr Howard with local labour in February/March 2008 and in November 2009 and has been an ongoing project. He has been project manager and has managed the building, carpentry and electrical for the whole undertaking. The project should be completed within the next six months.
  3. He is looking for more properties, with a view to undertaking other projects and building more small units for First Step Rentals. When asked by Mr Glazbrook whether it was his intention to run a parallel business within First Step Rentals, he said:
“It is, yes. That would be something I’d be very interested in getting into in Australia, something I’m passionate about. I’m passionate about turning old houses into new houses. And First Step Rentals would run alongside that with rental units available.” [Transcript, page 15]

When asked further whether he had only invested in properties and not invested in a business, he said:

“Well, I have invested in a business. I was advised, and I’ve always been advised, if you go into any property, commercial or residential – if you buy property commercially or residentially, it’s always advisable to purchase that property in your personal names and then lease it back to the company. That is the most tax efficient way of doing it. If your company is a different situation and it’s making too much money, you need to ... because that is a different scenario, because when you are setting up to do business it’s always advisable to buy property in your personal name and then lease it. And that’s what we’re supposed to do.” [Transcript, page 15]

  1. Mr Howard was also asked whether he thought that the business was “just an investment”, to which he replied:
“Well, I don’t see how it can be an investment. The only reason they have approached us was purely to First Step Rentals. That is the only reason that they were purchased. And they were purchased and leased to them so that First Step Rentals could then let them out and manage the properties, pay all the bills and make a profit. First Step Rentals would then start making a profit, although it would take a couple of years until we got a few more houses. It would then start generating more profit.” [Transcript, page 16]

  1. As to the activities of First Step Rentals, Mr Howard said that the Dover Gardens properties were owned by himself and his wife and were leased to the company. A formal lease agreement existed between Mr and Mrs Howard and First Step Rentals in relation to the properties. First Step Rentals had no involvement with the Grandview Drive property. The other Seaview Downs land, on which the four small units were to be built, was registered in Mr Howard’s name, but First Step Rentals would lease the units on the property once they were completed.
  2. In cross-examination, Mr Howard said that the eligible business for the purpose of his application for review was that of First Step Rentals. As to whether First Step Rentals had (and has) “exclusive rights” over the properties at Dover Gardens, he said that the properties had been disposed of in June and July 2010 because of the downturn in rental inquiries. He reiterated that the properties were too expensive for the majority of the migrants coming to Australia. First Step Rentals would have the Grandview Drive property when it was finished and, if he came back to South Australia, First Step Rentals would continue, but his main business would be in construction. The First Step Rentals website is still owned, but it had been shut down nearly two months ago. No further efforts were being made to promote the business of First Step Rentals.
  3. Mr Howard was asked about his involvement with On-Set Location Services Limited. He said the company built specialist vehicles and accommodation for the television and film industries. He said he was “pretty well” full-time for the company and worked about 50 hours a week at the moment. He was a salaried employee and, as the managing director, received a salary of £100,000 a year. With regard to his work for First Step Rentals, he would spend 1-1½ hours per day on the business of that company. Mrs Howard would possibly work 3 hours per day for First Step Rentals.
  4. When the Tribunal questioned Mr Howard about the First Step Rentals business and who was running it, the following interchange took place:
“... In your view, what was the business and who was running it?---The business was run by my wife and myself.
Yes. What was it, though?---We run every business together.
Yes. What was the business?---The business was supplying initial accommodation for immigrants when they first arrive. If you can imagine you get off the plane. All your furniture, all your belongings are en route. They’re coming by ship. They’re possibly not going to be here for six or eight weeks. You don’t know where you’re going to settle. So the idea was to give them somewhere nice, comfortable, clean in a good location for their early days just to welcome them into Australia, give them a good base to have a look around, decide where they want a long-term rent or purchase, and then their belongings would come along later. That was the whole idea, just an early, first-step rentals was our idea.
So you and your wife were the ones – you were carrying on the business?---Yes.
So how did First Step Rentals fit into that?---How did First Step Rentals fit into what? Sorry, sir.
That’s all right. Well, what was the relationship between First Step Rentals and you and your wife as the business owners, or runners? What did First Step Rentals do?---What did it do? It just provided accommodation. ...
...
So that’s what I was trying to understand, the relationship between what you do, you and your wife do, in the business and what First Step Rentals did as property management company?---Well, we own property. We own First Step Rentals. Cheryl and I purchased the properties. My wife and myself purchased the properties. We leased them to First Step Rentals, who are responsible for getting tenants in and supplying the furnished accommodation.
Yes?---They’re [sic] responsible for the advertising, the maintaining of the property, the cleaning of the property, all the washing, the servicing of those houses for the tenants when they move in and out. First Step Rentals is responsible for those properties on the lease that they’ve got from Cheryl and Nigel Howard.
And you were doing that as employees of First Step Rentals?---Yes.
You said before that one of the reasons why you purchased the properties in your personal name was because – did you say that was the way of doing things?---Yes. I was advised by my accountant, Mr Robinson, and by my accountants whenever I’ve purchased properties for companies, purchase the property in your own personal name and lease it to the limited company. That is the most tax efficient way of doing it.
First Step Rentals is a trustee of a trust, isn’t it?---Yes, a Pty Limited company and we’ve got the Howard Family Trust, yes.
So it’s the trustee of the Howard Family Trust?---Yes, it is, yes.
So whatever it does, it does in its capacity as trustee of the Howard Family Trust?---That’s right.” [Transcript pages 32-33]

  1. In giving her evidence, Mrs Howard also said that, when tenants leased the Dover Gardens properties, they leased them from First Step Rentals. As to her activities with First Step Rentals, on a daily basis she would check mail for inquiries, attend to the banking and payment of bills and, if required, maintain the properties. Her husband would attend to the manual maintenance of the properties, but would also be involved in office management activities, such as checking emails and rental reservations. She said that, on the last time or the last couple of times they had been in Australia, her husband spent most of his time project managing the renovation of the Grandview Drive property, which would eventually be part of First Step Rentals. In cross-examination, Mrs Howard said that she worked 2 to 3 hours a day for First Step Rentals. Her husband would also work about 3 hours a day for the company. When she was in the United Kingdom, she also worked for On-Set Location Services Limited. Her husband worked an additional 15 hours per week for First Step Rentals, on top of 50 hours per week for On-Set Location Services Limited.

EVIDENCE OF GLENN ROBINSON

  1. Mr Robinson was the accountant for Mr and Mrs Howard. In his evidence, he said that he first met Mr and Mrs Howard in August 2007 regarding the Dover Gardens properties. He discussed the business (together with the income tax implications) of short-term rental that they intended to conduct from the properties. When asked by Mr Glazbrook about the relationship between the ownership of the properties and the establishment of First Step Rentals, Mr Robinson said:
“The relationship would be as the – the First Step Rentals, that was created to act as the business arm for Mr and Mrs Howard as the owners of the property, and also as the – I suppose, the face of the business to the general public. It was seen that a company or a business name attaching itself to the company of First Step Rentals, and the general public would view that more comfortably than dealing with Mr and Mrs Howard themselves.” [Transcript, page 64]

  1. Then, when referred to financial statements, short-term rental agreements and emails relating to First Step Rentals, Mr Robinson said these documents were purely evidence of transactions relating to the short-term rental business that First Step Rentals and Mr and Mrs Howard were conducting. When questioned by the Tribunal as to whether it was Mr and Mrs Howard or First Step Rentals conducting the business, Mr Robinson said he thought it was First Step Rentals. When asked further by the Tribunal about the nature of the income that First Step Rentals derived from its activities, the following interchange took place:
“...where did that income go?---It was banked into a bank account.
In whose name would that have been?---I must admit, I don’t recall.
If you don’t know - - -?---Yes, I don’t actually know the actual account name.
But it was in the name of – in Mr and Mrs Howard’s name or the company name?---I – again, I’m – I don’t actually know.
No. Okay. So what was the nature of the income that the company derived, or did it derive an income itself?---The company derived income of a management-type fee in relation to its actions as the business arm of the Howards – of the owners of the property.
Yes. And the management fee was paid by the Howards to the company?---Correct.
...” [Transcript, pages 76-77]

CONSIDERATION

Should the first applicant’s Subclass 132 (Business Talent) visa be cancelled pursuant to s 134(1) of the Act?

  1. Section 134 of the Act provides that the Minister (and the Tribunal, standing in the shoes of the Minister) has a discretion to cancel a business visa if satisfied that the visa holder has not obtained a substantial ownership interest in an eligible business in Australia, is not utilising his or her skills in actively participating at a senior level in the day-to-day management of the business, or does not intend to do these things. The Minister (and the Tribunal, standing in the shoes of the Minister) must not cancel the visa if satisfied that the visa holder has made genuine attempts and intends to continue to make such genuine efforts to comply with these requirements. If the visa is cancelled and the visa holder is accompanied by another person who is a member of the family unit of the holder, the Minister must not cancel the other person’s business visa if the cancellation would result in extreme hardship to the person.
  2. It was Mr Glazbrook’s initial contention in his closing submissions that certain provisions of the Migration Regulations 1994, dealing with the granting of Subclass 132 (Business Talent) visas, are relevant in considering the cancellation of Mr Howard’s visa under s 134(1) of the Act. I accept that the Migration Regulations 1994 set out the matters that Mr and Mrs Howard would have had to comply with in order to obtain their visas. But, in my view, they are not relevant in deciding whether the visas should be cancelled. Section 134 of the Act is the relevant provision. And as Mr d’Assumpcao pointed out, there is no evidence before the Tribunal of what declarations were made by Mr Howard when he applied to the respondent for his visa. I turn, therefore, to consider the various matters under s 134 relating to visa cancellation.

Temporal Element

  1. In its statement of facts, issues and contentions the respondent noted that there is conflicting authority at the Tribunal level as to whether there is a temporal element in the Tribunal being able to consider evidence adduced by an applicant after the respondent’s delegate has made his or her decision: compare Re Song and Minister for Immigration and Citizenship [2010] AATA 461 at [39] with Re Li and Minister for Immigration and Citizenship [2009] AATA 501 at [14]. This issue does not arise in the present case. Having heard the evidence, Mr Howard has provided nothing further, other than bare assertions, since the delegate made her decision.

Substantial ownership interest in an eligible business – s 134(1)(a)

  1. Before dealing specifically with paragraph (a), I note that s 134(1) of the Act is disjunctive in its terms, so that the Minister (and, upon review, the Tribunal) needs only to be satisfied that one of the paragraphs (a), (b) or (c) is met for the visa cancellation discretion to be exercised. Paragraph (a) refers to “substantial ownership interest” and “eligible business”. The expression “ownership interest” in relation to a business is defined in s 134(10) of the Act to mean (amongst other things) an interest in the business as a shareholder in a company “that carries on the business”. In his evidence, Mr Howard said that the business of supplying short-term rental accommodation was carried on by himself and his wife. They owned the Dover Gardens properties and leased them to First Step Rentals, which was responsible for securing tenants and supplying the accommodation. Elsewhere in his evidence, when responding to Mr d’Assumpcao, Mr Howard said that the eligible business for the purpose of his application for review was First Step Rentals. On the evidence, I am satisfied that the activities of providing short-term rental accommodation were being carried on by Mr and Mrs Howard. First Step Rentals acted as their marketing and management entity. This was confirmed by Mr Robinson, their accountant, who said that the income derived by First Step Rentals was of a management-type fee in relation to its actions as the business arm of Mr and Mrs Howard, the owners of the Dover Gardens properties. The management fee was paid by Mr and Mrs Howard to First Step Rentals. It was also confirmed in correspondence sent to the respondent by Mr Robinson’s firm (Exhibit R1, T9, page 78), which reads:
“Nigel and Cheryl Howard (“the Howards”) are the owners and operators of a “short term accommodation” letting business.
The Howards have appointed First Step Rentals (FSR) Pty Ltd (as trustee of the Howards [sic] Family Trust) as agent to act as property manager in relation to the properties.
A fee is paid by the Howards to FSR (in the 2009 year this amount was 10% of gross rental income).
...”

Further confirmation appears in the Residential Property Management Agreement between Mr and Mrs Howard and First Step Rentals (Exhibit R1, T9, pages 107-111). Under the Agreement, Mr and Mrs Howard appointed First Step Rentals to be the sole and exclusive managing agent for the properties at Dover Gardens.

  1. As to the short-term rental agreements between Mr and Mrs Howard and tenants in relation to the Dover Gardens properties (Exhibit R1, T6, pages 55-60), I note that the agreements were signed by Mrs Howard on behalf of the “Owner”. During Mr d’Assumpcao’s cross-examination of Mr Howard, he questioned whether the short-term rental agreements had been signed by Mr Howard in her capacity as a director of First Step Rentals. When I queried Mr d’Assumpcao about the agreements, his response was that Mrs Howard had signed the agreements as an owner of the properties for the purpose of effectively deriving income for the business which was run by First Step Rentals (Transcript pages 31-32). I do not accept this proposition. As I have said above, I am satisfied that, if there was a short-term rental accommodation business being carried on at all (which I am unable to accept), it was being carried on by Mr and Mrs Howard and not by First Step Rentals, and I so find. First Step Rentals was merely the managing agent for Mr and Mrs Howard under the terms of their Residential Property Management Agreement.
  2. It was Mr d’Assumpcao’s contention on behalf of the respondent that First Step Rentals was “not a business”. Moreover, if the Tribunal found that it was a business, he submitted that it was not an “eligible business”. In my view, Mr d’Assumpcao’s contention is misplaced. It could not be said that First Step Rentals was a business. If anything, it could only have been the vehicle that carried on a business, but it could not itself be a business. In considering the question, the Act does not define a “business”. In Hope v Bathhurst City Council [1980] HCA 16; (1980) 144 CLR 1 at 8-9, Mason J defined a business 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”. In the relevant Departmental policy relating to s 134 of the Act (Procedures Advice Manual 3 or “PAM3”), the following factors may be considered in ascertaining whether activities constitute the carrying on of a business (section 7.4):

As to the application of PAM3, it is established that, where a Minister has adopted a general policy as a guide to the exercise of a discretionary power, the Tribunal will exercise the power in the manner directed in the policy unless that are cogent reasons to the contrary: Re Drake and Minister for Immigration and Ethnic Affairs (No 2) ( 1979) 2 ALD 634, 645; Hneidi v Minister for Immigration and Citizenship [2010] FCAFC 20; (2010) 182 FCR 115 at [48].

  1. In Re Leo v Minister for Immigration and Multicultural and Indigenous Affairs [2006] AATA 309 at [51], Associate Professor G A Barton, Member, (citing Evans v FC of T [1989] FCA 205; (1989) 89 ATC 4540) stated the following:
“Whether a particular activity or course of activities constitutes a business is a question of fact and degree that is to be determined by considering matters such as the scale of the activity and whether it is conducted continuously and on a commercial basis to derive a profit.”

  1. In Puzey v Commissioner of Taxation [2003] FCAFC 197; (2003) 131 FCR 244, the Full 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. The Court went on to say [at 47-48]:
“47. 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.
48. 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).”

  1. Mr Howard has not provided sufficient evidence demonstrating that First Step Rentals:

(a) is commercially based. For example the Butterworths Australian Legal Dictionary defines “commercial property” as “[i]ncome producing real estate such as office buildings, as distinguished from residential property”;

(b) entered into transactions – as distinct from mere rental agreements – on a continuous basis for the purpose of making a profit; and

(c) engaged in activities, other than securing tenants, on a continuous basis for the purpose of making a profit.

  1. In my view, even giving the expression its broadest reading, First Step Rentals does not carry on a “business”. There is no evidence of anything that it “conducts” or “carries on”. It has no “activities” and does not engage in “transactions”. There is no evidence of a business plan and no evidence of financial affairs or anything else that requires management in any real sense. Even if it might be asserted that Mr and Mrs Howard were engaged in activities that amounted to the carrying on of the business providing short-term rental accommodation, for reasons that have been outlined in relation to First Step Rentals, their activities would not amount to the carrying on of a business (whether in partnership or otherwise) for the purposes of s 134(1)(a) of the Act.
  2. It follows that First Step Rentals and Mr and Mrs Howard (if such is asserted), cannot be carrying on an “eligible business”. In these circumstances, the discretionary power available to the Tribunal pursuant to s 134(1)(a) of the Act may be exercised.

Active participation at a senior level in the day-to-day management of an eligible business - s 134(1(b)

  1. Although it is unnecessary for me to address s 134(1)(b) of the Act, because of my findings in relation to s 134(1)(a), for completeness I will do so.
  2. In its statement of facts, issues and contentions, the respondent contends that Mr Howard has not actively participated at a senior level in the day-to-day management of First Step Rentals. I agree with that contention. The evidence points to a conclusion that Mrs Howard was, in fact, charged with the responsibility of ensuring that the Dover Gardens properties were leased, that the short-term rental agreements were signed, that maintenance was in order and that there was adequate advertising. Mr Howard’s evidence was that he would spend 1½ hours per day in the activities of First Step Rentals, but that by far the majority of his time was spent attending to the affairs of On-Set Location Services Limited. Moreover, his evidence was that he was currently not running the business of First Step Rentals because the Dover Gardens properties had been disposed of in June or July 2010. He said he had been winding down the business for about 18 months. Certainly, the First Step Rentals website had been shut down, which meant that a vital means of attracting custom was no longer available. In my view, Mr Howard has not provided sufficient evidence to show that he was actively participating at a senior level in the day-to-day management of the purported business of First Step Rentals.

Genuine efforts – s 134(2)

  1. Under s 134(2) of the Act, upon review, the Tribunal must not cancel a business visa if it is satisfied that its holder has made a genuine effort to do certain things. In Re Yam and Minister for Immigration and Multicultural and Indigenous Affairs [2004] AATA 283, the Tribunal (at paragraph 53) expressed the following views regarding the concept of “genuine effort” for the purposes of s 134(2) of the Act:

These views have subsequently been adopted by Tribunals in various cases and are adopted by me in the present case. I would simply add that, as was said by Deputy President Hotop in Re Abbu and Minister for Immigration and Multicultural Affairs [2006] AATA 898 at paragraph 42, the phrase “genuine effort” is an ordinary English phrase and the appropriate ordinary meaning of that phrase for present purposes is “real and sincere endeavour or strenuous attempt”. Moreover, evidence showing “sporadic and desultory activity” by an applicant that “lacks the sustained and continuous quality ... implicit in the requirements of s 134(2)” points to a lack of genuine efforts (Re Koosasi and Minister for Immigration and Multicultural Affairs [2006] AATA 179 at paragraph 53 per Deputy President Walker).

  1. In my view, Mr Howard’s efforts fall far short of what is a genuine effort for the purposes of the Act. As I have said above, Mr Howard was working 50 hours per week as the managing director of On-Set Location Services Limited. He estimated that he spent 7½ to 10 hours per week in relation to the activities of First Step Rentals. The Oxford Dictionary of English defines “genuine” to mean “truly what something is said to be; authentic”, and “effort” to mean “a vigorous or determined attempt” (Re Gunawan and Minister for Immigration and Multicultural Affairs [2006] AATA 852 at [46] per Senior Member A Sweidan). If Mr Howard had been engaging in “a vigorous or determined attempt” in undertaking the activities of First Step Rentals, one would expect that he would be engaged in working more than 7½ to 10 hours per week in these activities.

Matters to be taken into account in determining genuine effort – s 134(3)

  1. In relation to the matters that the Tribunal may take into account when determining whether a person has made genuine efforts within the meaning of s 134(3) of the Act, notes to guide the interpretation of these matters are provided in paragraph 9.2 of PAM3. The relevant matters that may be taken into account, the notes to their interpretation and, where applicable, the factors involving Mr Howard’s efforts are as follows:

(a) Business proposals that the person has developed. PAM3 refers to whether there is a business proposal which is considered genuine, realistic and achievable. There is no evidence that Mr Howard has developed a genuine, realistic and achievable business proposal.

(b) The existence of partners or joint venturers. Mr Howard had no formal contract with partners or joint venturers. There was no suggestion that he and his wife were in a formal partnership in relation to a purported eligible business.

(c) Research that the person has undertaken into the conduct of an eligible business in Australia. There is no substantial evidence of any research being undertaken by Mr Howard.

(d) The period or periods during which the person has been present in Australia. PAM3 notes that it is expected that a genuine effort would require significant time in Australia to, for example, explore business opportunities, contacts and sources of supplies, inspect premises/property and goods, develop relationships and gain an understanding of local practices. As contended by the respondent, it would seem that Mr Howard has not spent sufficient time in Australia to explore business opportunities, develop relationships and gain an understanding of business practices

(e) The value of assets transferred for use in obtaining an interest in an eligible business. It is clear that Mr Howard has transferred significant funds into Australia. However, it was the respondent’s contention (which I accept) that the funds were transferred principally for the purchase, refurbishment and maintenance of properties, including in excess of $900,000 for a residence to be used as the home of Mr and Mr Howard. This does not establish a genuine effort

(f) The value of ownership interest in eligible businesses in Australia that are, or have been, held by the person. On the evidence, there are no other eligible businesses that are, or have been, held by Mr Howard.

(g) Business activity that is, or has been, undertaken by the person. As has been outlined above, there is no “business activity”, in the required sense, that is, or has been, undertaken by Mr Howard.

  1. When the principles referred to above are applied to Mr Howard’s circumstances, there is little evidence to support a finding that he has himself been engaged in continuous activity to grow and develop the purported business of First Step Rentals. It is the respondent’s contention (which I accept) that the applicant’s degree of effort falls within the category of “purely superficial or token” (per Re Yam, supra) and involved minimal “exertion or endeavour” (per Re Leo, supra).

Extreme hardship – s 134(5)

  1. Section 134(5) of the Act must be read with s 134(4). In its application presently, s 134(4) provides that, if Mr Howard’s business visa is cancelled pursuant to s 134(1) and Mrs Howard would not have held her visa if she had not been a member of her husband’s family unit, the Minister must cancel her visa by giving written notice. However, s 134(5) provides that the Minister must not cancel Mrs Howard’s visa if the cancellation would result in extreme hardship to her.
  2. It was submitted by the respondent that extreme hardship is an extremely difficult test for applicants to satisfy (see Man Ki Kim v Minister for Immigration and Ethnic Affairs [1995] FCA 1088; (1995) 37 ALD 481 at [25]- [26]; Re Wang and Minister for Immigration and Multicultural Affairs [2000] AATA 961; Re Salim and Ors and Minister for Immigration and Multicultural and Indigenous Affairs [2002] AATA 899 at [44]- [47]). There was no evidence put before me as to what hardship, if any, would occur if Mrs Howard’s visa was cancelled pursuant to s 134(4) of the Act. Certainly, there was no evidence that Mrs Howard would suffer extreme hardship if her visa was cancelled. In the absence of any such evidence, I would conclude that there would be no extreme hardship suffered by Mrs Howard if her visa was cancelled pursuant to s 134(5) of the Act.

SUMMARY AND CONCLUSION

  1. For the reasons outlined above, I am satisfied that first applicant has not obtained a substantial ownership interest in an eligible business in Australia and is not utilising his skills in actively participating at a senior level in the day-to-day management of that business (s 134(1)(a) of the Act). I am also satisfied that the first applicant has not made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia and has not made a genuine effort to utilise his skills in actively participating at a senior level in the day-to-day management of that business (s 134(1)(b) of the Act).
  2. Given the findings I have made in this matter, I can see no basis upon which I should exercise the residual discretion residing in me not to cancel the first applicant’s visa. I find that he has failed to comply with his visa conditions.

DECISION

  1. The Tribunal affirms the decision under review.

I certify that the 41 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne


Signed: ............J Coulthard..........................................

Associate


Dates of Hearing 28-29 September 2010

Date of Decision 9 December 2010

Advocate for the Applicant Mr R Glazbrook

Solicitor for the Applicant Migration Solutions Pty Ltd

Advocate for the Respondent Mr P d'Assumpcao

Solicitor for the Respondent AGS

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