Australian Immigration Daily News

When you entered the migration advice profession, did you have any idea that your work might require you to explore and understand the obscure details of Australian business law? 

For example, to be able to analyse whether, in circumstances where the co-trustees of a family trust that conducts business activities, could be considered to be the “sole proprietor” of a business? 

The again, it probably didn’t occur to you that in trying to navigate the Migration Act and Regulations, you would be required to find your way through thickets of interpretation as seemingly difficult as trying to answer the question: “How many angels can dance on the head of a pin?” (The answer to that question, of course, is “As many angels as the Department or the Tribunal say, just so long as the client is found to satisfy the criteria for the grant of the visa!!”. 

As a matter of fact, the question of whether a co-trustee can be considered to be a sole proprietor actually did surface in a case that was decided by the Federal Circuit Court in late September, Sefat & Ors v Minister for Immigration & Anor (2016) FCCA 2501 (29 September 2016). 

The background of this case was that the applicant was seeking a Business Skills (Residence) (Subclass 892) visa, with his wife and children as secondary applicants.  The applicant and his wife were the co-trustees of a family trust that operated two separate businesses, one that was engaged in the retail sale of shoes, and the other that was engaged in providing “voice over internet protocol” services. 

Why did it matter whether the applicant could be considered a sole proprietor of the business? 

Because the criteria for the grant of the Subclass 892 visa require, at clause 892.11(1), that the applicant “has had, and continues to have, an ownership interest in 1 or more actively operating main businesses in Australia for at least 2 years immediately before the application is made”.  And because section 134(10) of the Migration Act provides that the term: “ownership interest, in relation to a business, means an interest in the business as….(c) the sole proprietor of the business”. 

So what was the difficulty in this case?  

The Department, in the first instance, was not satisfied that the main applicant had and continued to have an ownership interest in the main business, and thus refused the application. 

And the Tribunal affirmed the Department’s decision to refuse the application.  

In doing so, the Tribunal had regard to a decision of the Federal Court in Campbell v Minister for Immigration & Citizenship.  The Tribunal took the view that under the holding in Campbell’s case, a person who is a co-trustee of a trust cannot be considered to be a “sole proprietor” within the meaning of section 134(10) of the Act.  

In other words, the approach adopted by the Tribunal was that once it was established that the main applicant was a co-trustee of the trust that operated the business in question, he could not be considered a sole proprietor under 134(10), no matter what the actual terms of the trust deed said.  In short, the Tribunal considered that the matter was “done and dusted” on the basis that the main applicant was a co-trustee.  And further, the Tribunal concluded that: “The practical reality of the husband’s (the main applicant’s) day-to-day management and control of the business, in contrast to the wife’s passive role, did not alter the fact that they were co-trustees and…could not be regarded as sole proprietors”.  

Interestingly enough, in this case the Tribunal found that it was not bound to follow PAM3,  which provides that where an applicant shares a trustee role with their spouse, they can be attributed 100% ownership. (!) 

The Federal Circuit Court (Judge Heffernan) concluded, however, that the Tribunal had misinterpreted Campbell’s case by finding that the case stands for the proposition that in circumstances where a person is the co-trustee of a trust, that person cannot be considered a “sole proprietor” simply based on the person’s status as a co-trustee alone. 

Rather, Judge Heffernan held, that in order to determine whether the main applicant had an “ownership interest” within the meaning of section 134(10), it was necessary to consider the exact nature of the interests in the business that were vested in the main applicant under the trust deed. 

And this was an inquiry that the Tribunal simply failed to undertake.  Again, the Tribunal’s examination of the issue started and stopped with the finding that the main applicant was a co-trustee, and that on that basis he could not possibly be considered to be a “sole proprietor” and thus could not be considered to have an ownership interest in the main business under 134(10). 

Judge Heffernan found that the facts in Campbell’s case were distinguishable from those in Sefat.  In Campbell’s case, the applicant was a co-trustee and beneficiary of the trust, and nothing more. By contrast, in Sefat, the main applicant was not only a co-trustee, but he was also the “appointor” under the trust deed.   It was submitted on behalf of the main applicant that his status as “appointor” gave him “ultimate control” over the business.  

Judge Heffernan ruled that it was at least arguable that the main applicant’s status as appointor of the trust meant that he qualified as being a “sole proprietor”  and thus as having an ownership interest, and thus arguably satisfied the criteria for the grant of the 892 visa. 

Thus, the Court held that the Tribunal committed jurisdictional error by failing to have regard to the actual terms of the trust deed, and to examine in granular detail the nature of the interest that the main applicant held in the business under the deed. 

If this all sounds a bit complicated and hard to follow, it’s not nearly as bad as it sounds! What happened here is that the Tribunal committed jurisdictional error by failing to have regard to a relevant consideration, namely: precisely what ownership interest did the main applicant have in the business under the terms of the deed. 

A lot easier than figuring out how many angels can dance on the head of a pin!!!!

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