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CATCHWORDS: Review of business sponsorship rejection - temporary business entry scheme - ability to comply with undertakings.

A & G AUSTRALIA PTY LTD [2002] MRTA 3405 (14 June 2002)

Migration Review Tribunal
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A & G AUSTRALIA PTY LTD [2002] MRTA 3405 (14 June 2002)
Last Updated: 4 December 2002

[2002] MRTA 3405

CATCHWORDS: Review of business sponsorship rejection - temporary business entry scheme - ability to comply with undertakings.

REVIEW APPLICANT: A & G Australia Pty Ltd

TRIBUNAL: Migration Review Tribunal

PRESIDING MEMBER: Lucinda Wright

MRT FILE NUMBER: N00/02436

DIMIA FILE NUMBER: OPF2000/4647

DATE OF DECISION: 14 June 2002

AT: Sydney

DECISION: The Tribunal sets aside the decision under review and substitutes a decision that the review applicant be approved as a standard business sponsor. The Instrument of Approval is attached to this statement.

STATEMENT OF DECISION AND REASONS

APPLICATIONWhen converting an FE to a draft Decision an AutoText entry needs to be inserted at the beginning of this heading. sodr(Press F3). This will insert the heading Statement of Decision and Reasons. FOR REVIEW

1. This is an application for review of a decision made by a delegate of the then Minister for Immigration and Multicultural Affairs (the delegate). A & G Australia Pty Ltd (ACN 086 565 504) (the review applicant), applied for approval as a business sponsor on 23 November 1999. The delegate's decision to reject the application for approval was made on 12 April 2000.

JURISDICTION AND STANDING

2. The review applicant lodged a valid application for review with the Tribunal on 9 May 2000. The decision is reviewable by the Tribunal and the application for review has been validly made by a person with standing to apply for review.

LEGISLATION AND POLICY

3. The Migration Regulations 1994 (the Regulations), provide for approval of persons as business sponsors. This is part of a scheme called temporary business entry. This part of the scheme involves three stages:

A person (the employer) seeking approval as a business sponsor.

An approved business sponsor seeking approval of a nomination of an activity in which an individual is proposed to be employed in Australia.

A person applying for a temporary visa (Subclass 457) on the grounds that the visa applicant proposes to be employed by an approved business sponsor in an activity that is the subject of an approved business nomination.

4. In order to streamline the procedures the Government introduced a system of sponsorship status whereby a business may obtain prior in-principle approval to bring in temporary business entrants to Australia. To obtain such approval the business has to demonstrate, among other things, that it is lawfully operating in Australia (or intends to establish a business in Australia), that the introduction of the temporary business entrants or expatriate employees will be of benefit to Australia, and that it is capable of fulfilling various undertakings with regard to such employees. Such a status is granted for a set period and may be renewed.

5. Once a business has been granted sponsorship status, it is able to nominate positions that it wishes to fill with expatriate employees. Under the Regulations when the scheme was first introduced the nomination were either for a key or non key activity. The term `key activity' was defined in the Regulations. The criteria for the Subclass 457 visa reflected this distinction and the requirements for a visa for a person proposing to be employed in a key activity were set out in subclause 457.223(4) and those for a non key activity in subclause 457.223(5).

6. Following amendments to the legislation that came into force on 1 July 2001 the distinction between key and non key activities was abolished and a new requirement for minimum skill and salary thresholds was introduced. The minimum skill requires that the duties of the nominated activities must correspond with the duties of an occupation specified in a Gazette Notice for this purpose. That list corresponds to the top four levels of the Australia Standard Classification of Occupations (ASCO). The nominated salary must meet a minimum level that is also set by Gazette Notice. The salary corresponds to the average annual salary for all Australians and is calculated by the Australian Bureau of Statistics.

7. In conducting a review, the Tribunal is bound by the Migration Act 1958 (the Act), the various Regulations made under the Act, and written directions issued by the Minister under section 499 of the Act. Some matters may be the subject of policy, as found in publications such as the Procedures Advice Manual 3 (PAM3) and the Migration Series Instructions (MSIs), produced by the Department of Immigration and Multicultural and Indigenous Affairs (the Department). The Tribunal is required to have regard to policy and apply it unless there are cogent reasons for departing from policy.

8. The Tribunal has the power to affirm a decision to refuse to approve a business sponsorship. It also has the power to approve a business sponsorship and sign the Instrument of Approval.

9. The criteria and policy immediately relevant to this review are:

Legislation:

Regulations 1.20A - 1.20D of the Regulations

Policy:

PAM3: Division 1.4A - Temporary Business Entry: Sponsorship and Nomination

10. The Tribunal generally has regard to the Regulations as they stood at the time of lodgement of an application for approval. However, subsequent amendments may apply in some circumstances.

EVIDENCE

11. The Tribunal has the following documents:

MRT case file N00/02436, folio numbered 1-154.

DIMA case file OPF2000/4647, folio numbered 1-83.

12. A hearing was held on 20 March 2002 and evidence was given by Mr Alfred Tsang, the Managing Director of the review applicant and Mr Shao Bin Chen, the visa applicant.

13. The review applicant was represented by Mr Stirling Henry, a registered migration agent.

14. A summary of the evidence as it appears from the files and the hearing follows.

15. The review applicant was registered as a company on 5 March 1999. The application for approval as a business sponsor was lodged on 23 November 1999. In submissions accompanying the application the review applicant's then adviser and its accountant explained that the review applicant was established to restructure and consolidate the business operations of three other companies owned by Mr Tsang and other business partners. The business of one of those companies was described as the import and export, manufacturing, distributing, marketing and retail of a variety of products including computer hardware, telephone, technological, cooking appliances and cosmetics as well as the holding sole distributorship for some overseas brand name products. Another of the companies dealt with developing, designing, manufacturing and distributing technological equipment to process "credit card" type transactions. The third company was described as the retail and servicing arm for the telecommunications products of the group. Mr Tsang was described as the major shareholder of the group of companies.

16. The submission by the accountant also stated that he believed that the review applicant was financially viable after taking into consideration the fact that the group had long standing business operations since 1991/1992 and it had no external debts. It also had an extensive sales and distributing network for products with export potential.

17. The submission from the adviser stated that the review applicant's exports include domestic appliances and it imported from China heavy duty pumps, gardening tools and a new range of lighting. The submission stated that the review applicant intended to promote and distribute in Hong Kong and China, a new Australian product that is a petrol additive that reduces fuel consumption. Promotional material for this product was also submitted.

18. The review applicant applied for approval as a standard business sponsor (seeking entitlement to make one nomination of a business activity within a 12 month period). The Tribunal is dealing with a separate application for review in relation to the refusal of a visa applied for by Mr Shao Bin Chen on the basis that the review applicant is proposing to employ Mr Chen as a Marketing Manager (MRT file number N00/02438).

19. The delegate requested additional information from the review applicant including financial statements and details of staff employed as well as a statement which demonstrated that the review applicant could meet the requirements of paragraph 1.20D(2)(c) relating to the introduction of technology or business skills and the training activities of the review applicant. The review applicant submitted additional documents in response to the request.

20. The delegate refused to approve the review applicant as a business sponsor on the basis that it failed to meet the requirements under paragraph 1.20D(2)(f) of the Regulations. The delegate was not satisfied that the review applicant was able to comply with the undertakings in accordance with form 1067. The delegate listed his concerns regarding the financial position of the three companies whose business was taken on by the review applicant as it was described by their respective financial statements. In his decision record, the delegate noted that he was not satisfied that the review applicant, which he described as formed by the consolidation of a shelf company, a company with accumulated loss and declining sales, and a company with accumulated loss and no expenditure on employees' wages, was capable of complying with the sponsorship undertakings.

21. A further submission was made on 27 April 2000 after the decision was made by the delegate to refuse the sponsorship application. This included a letter from the accountant who had provided a letter of support at the time of the application. The accountant submitted further information in respect of the three companies particularly in respect of their financial position.

22. Prior to the hearing the review applicant submitted documents as evidence of its current business activities, financial status, evidence of purchase of a property for use as its business premises. In a submission the representative stated that the review applicant employed three people, Mr Alfred Tsang, Mrs Gladys Tsang and Ms Wai-Man Tracey Tsang. The submission stated that as the company was a relatively small family business it did not employ any graduates or trainees or have a training program.

23. The main business activity of the review applicant was described as trading with Hong Kong and China, including the export of health products and appliances from Australia. The review applicant planned to promote the sale of the fuel performance enhancer in China and considered that there was a huge potential market. The review applicant considered that the visa applicant would assist the company to successfully break into the market.

24. Mr Tsang's position in local government and his other business interests were also described in the submission, in particular the success of his company I Love Sushi Pty Ltd. That company has a turnover of $2 million and employs 25 people. The submission confirmed that because of his substantial business interests Mr Tsang was in a position to underwrite the review applicant if necessary.

25. The financial statements for the review applicant showed that the review applicant has a trading profit but an operating loss and a negative equity. Its sales revenue for 2001 was substantially less than that for 2000. Company tax returns for 1999 and 2000 indicated that the review applicant had no taxable income.

26. At the hearing Mr Tsang confirmed the evidence above. He stated that the review applicant was still carrying on some of the business of the three other companies which had not been wound up yet, for accounting purposes. The review applicant had recently entered into an agency agreement for the export of Australian educational services of TAFE Global Pty Ltd to Hong Kong. It also had the exclusive distribution of the fuel performance enhancer for Hong Kong and China.

27. Mr Tsang emphasised his commitment to the marketing of this product which he regarded as a great Australian invention. He had carried out market and distribution research for several years but to date had not been able to obtain the necessary import licence and distribution approval from the Chinese authorities. He expected the visa applicant to be able to assist him considerably in this regard as the visa applicant's brother was an official in the relevant government authority.

28. Mr Tsang confirmed that the review applicant employed himself and his wife full time and their daughter on a part time basis.

29. In his comments on the financial status of the review applicant, particularly in regard to its negative equity, Mr Tsang confirmed that he considered the review applicant to be viable and referred to its sales figures and his other successful business interests and personal assets. He considered the financial statements did not adequately reflect the actual business situation. He also referred to the potential for expansion if the visa applicant was granted a visa and the promotion of the fuel performance enhancer could get seriously underway.

30. Mr Tsang was not able to clarify whether the property recently purchased and referred to in the adviser's submission was purchased in his name or by the review applicant. He stated that it was intended to be a purchase by the review applicant. He referred to bank loans mentioned in the financial statements. It appears from the copy of the contract for sale that is on the Tribunal's file that the purchase was made by Mr Tsang and his wife and not the review applicant.

31. Mr Tsang stated that the personal and business contacts of the visa applicant were in his view, essential to successfully opening the market for the Australian fuel performance enhancer.

32. With regard to training or the introduction of business skills or new or improved technology Mr Tsang stated that he considered that the employment of the visa applicant would introduce new business skills to Australia. His representative undertook to make a further submission on the review applicant's ability to meet the criteria in paragraph 1.20D(2)(c).

33. Following the hearing the review applicant submitted additional documents including a statement by Mr Tsang, a statement by Mr Hans Rex, one of the developers of the fuel enhancer product, and revised financial statements for 2001 as well as preliminary financial statements for the six months ending 31 December 2001.

34. In his statement Mr Tsang stated that the part time employee, Tracy Tsang had been given study leave and that she and Gladys Tsang would be given assistance in undertaking intensive Mandarin courses in China. He himself, as a full time employee, had undertaken various business seminars and attended business conferences.

35. Mr Tsang considered that the visa applicant would bring new or improved business skills to Australia with his experience of the China trade a swell as his marketing skills and marketing information in China.

36. Mr Tsang stated that he had already invested nearly $200,000 in the review applicant and remained personally committed to the viability of the business. He submitted a statement of his personal assets and liabilities as evidence of his ability to support the review applicant.

37. The submission by the representative that supported the documents argued that the product that the review applicant planned to launch on the China market represented `a breakthrough in metal dissolution technology'. The representative submitted that the requirements set out in regulation 1.20D could still be met even if the improved technology was introduced indirectly to Australia. Such indirect benefits could still be considered.

38. The revised financial statements for the review applicant showed an accumulated loss and negative equity of approximately $15,000, but an operating profit of $1,702 for the year ending June 2001. The situation improved markedly in the first six months of the current financial year with a small retained profit and equity of approximately $3000. There was no explanation for the review applicant's improved trading position.

FINDINGS AND REASONS

39. To be approved as a business sponsor, the review applicant must meet the criteria set out in regulation 1.20D. The issues are considered under the following headings:

Lawfully operating in Australia a business in which employment of a visa holder would contribute to employment for Australian citizens and permanent residents, or contribute to expansion of Australian trade, or contribute to improvement of Australian business links, or contribute to competitiveness within sectors of the Australian economy

40. The review applicant (A&G Australia Pty Ltd) (ACN 086 565 504) was registered on 5 March 1999. The company was set up as a result of the shareholders' decision to consolidate their other businesses operating under three different companies. These companies were involved in various business activities such as manufacturing, marketing, and distribution of a variety of products.

41. In the initial submission the review applicant's adviser described the operations of the three constituent businesses, stating that the review applicant had two permanent and two part-time employees. It was claimed that the review applicant directly contributed to the expansion of Australia's trade in services and indirectly to the increased sales of Australian goods as well as to competitiveness in the sector with the export of an Australian product.

42. The review applicant's financial statements for 1999 show that after three months of operation the company had a trading profit of $15,046 a small operating loss and a negative equity of $3,778.

43. At the time of this decision there is evidence that the review applicant is continuing to operate lawfully and has expanded into other areas although its stated main business objective, to launch its fuel enhancer on the Chinese market, has not progressed. Mr Tsang has given evidence that he is waiting to be able to use the services and expertise of the visa applicant to carry this project forward.

44. The review applicant's financial statements for 2001 show that it operates with a trading profit but an operating loss and a larger negative equity. The greater part of the company's liabilities are bank loans and a loan from the directors. There is evidence that the Managing Director, Mr Tsang, his wife and daughter, all of who are Australian residents, are employed by the company.

Will be the direct employer of any visa holder

45. The information on the sponsorship application is that the review applicant will be the direct employer of the visa holder. There is no evidence before the Tribunal that this will not be the case.

Will introduce, utilise or create new or improved technology or business skills, or has a satisfactory record or demonstrated commitment towards training Australian citizens and permanent residents

46. It was claimed at the time of application that the visa holder would initiate training of an Australian resident to act as a back up person at the earliest opportunity. At the time of decision this training had not commenced as the visa applicant had not been employed by the review applicant. The review applicant employed only Mr Tsang, his wife and their daughter on a part time basis. No further evidence on the review applicant's training record was submitted. At the hearing it was submitted that the review applicant would introduce, utilise, or create in Australia, new or improved business skills.

47. The review applicant has since submitted further claims that it has provided some training or study opportunities to its three employees and that further training in Chinese would be provided to two of them. The submission also referred to training that the visa applicant would receive but this is not relevant to the criteria since he is not an Australian citizen or Australian permanent resident.

48. The Tribunal does not accept the claim by the review applicant that the export of a new Australian product would introduce new technology to Australia even indirectly, although there may be a benefit to Australia in increased trade.

49. The review applicant has also argued that the visa applicant would bring new business skills to Australia because of his specialised knowledge of the Chinese market. The Tribunal acknowledges that the visa applicant may have access in China that could facilitate the introduction of the product to the Chinese market and to the extent the applicant may introduce improved business skills to Australia if the product is successfully launched and the Chinese market penetrated.

50. The Tribunal finds that the review applicant meets the criteria in paragraph 1.20D(2)(c). On balance, given the small size of the company, which is essentially a family business that employs family members, the Tribunal finds that the training it has provided in its business operations is adequate for the purposes of the criteria for approval as a business sponsor. The Tribunal has also taken into account that the employment of the visa applicant may assist the company to launch a new Australian product in the Chinese market and to that extent his business skills could be said to be improved business skills.

Nothing adverse known about business background

51. There is no adverse information before the Tribunal about the business background of the review applicant. The managing director and majority shareholder of the review applicant, Mr Tsang, has other successful business interests, including a company called I Love Sushi Pty Ltd which manufactures and supplies food products to wholesalers and exports some of those products through the review applicant.

Satisfactory record of compliance with immigration laws

52. There is no evidence before the Tribunal that the review applicant does not have a satisfactory record of compliance with immigration laws.

Ability to comply with undertakings in respect to visa holders

53. The review applicant was refused approval as a business sponsor because the delegate was not satisfied that the review applicant had the ability, in relation to each visa holder to comply with the undertakings given in form 1067.

54. Since the primary decision the review applicant has consolidated its business and its turnover has increased, although it declined by almost 50 % between 2000 and 2001. The review applicant had a trading profit but an operating loss, and, of more concern to the Tribunal, a negative equity that increased from 1999 and almost doubled between 2000 and 2001. The increased liabilities are due to loans from the bank and the directors.

55. The review applicant has sought to show that its financial position is now improving and has submitted accounts for the first half of the current financial year that show a modest profit and net equity. Although the review applicant is showing a modest profit it is still open to question whether the review applicant has the financial capacity to meet its undertakings as it stands.

56. The Tribunal notes in this regard, Mr Tsang's expectation that the visa applicant would contribute substantially to the profitability of the review applicant. Mr Tsang has also claimed that the company is likely to grow and become profitable if it is able to market the fuel performance enhancer in China. Mr Tsang has great expectations for the success of this product and he is personally committed to its success in the market. However his plans depend to a considerable extent being able to use the visa applicant and his contacts with the relevant authorities to make the breakthrough into the market.

57. The Tribunal also notes that Mr Tsang has stated that he is in a position to underwrite the review applicant if necessary. He has already made a loan of almost $200,000 to the company. He has given evidence of the success of his other major business, I Love Sushi Pty Ltd. In his oral evidence he has stated that his personal assets have increased. There is no evidence of those assets other than the purchase of the property referred to above but Mr Tsang has submitted a statement of his personal assets and liabilities to the Tribunal. The Tribunal accepts that Mr Tsang as the owner of the review applicant, together with his wife, has invested considerable effort and funds into setting up the review applicant and its operations. It accepts that he would underwrite its operations by further loans if necessary. In these circumstances it accepts that the review applicant has the ability to comply with its undertakings, in particular its financial undertakings towards the visa applicant. The review applicant has sought approval for one nomination which is proportionate to its modest size.

CONCLUSION

58. Given its findings above the Tribunal is satisfied that the review applicant meets the requirements to be approved as a business sponsor. The necessary next step is for the review applicant to lodge a nomination with Department in respect of the activity of Marketing Manager in which the review applicant proposes to employ the visa applicant.

DECISION

59. The Tribunal sets aside the decision under review and substitutes a decision that the review applicant be a standard business sponsor. The Instrument of Approval is attached to this statement.



INSTRUMENT UNDER MIGRATION REGULATION 1.20D


APPROVAL AS A BUSINESS SPONSOR

On 14 June 2002 the Migration Review Tribunal approved the application of for approval as a standard business sponsor.

The sponsorship number for this approval is to be provided by the Department of Immigration and Multicultural Affairs.

The maximum number of nominations of business activities that may be approved under this sponsorship, while it is in effect, is one.

This approval has effect:

* until the number of Subclass 457 visas granted to primary applicants under this sponsorship equates to the maximum number of business nominations specified above; or

* for 12 months from the date of this instrument; or

* until revoked under regulation 1.20F;

Whichever happens first.
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