Category Archives: Blog & Articles

Australia is becoming more popular as the destination for investors and business migrants from Asia, particularly China, to invest in. In the case of business migrants, they are often required under their visa conditions to invest significant amount of money (ranging from $500,000 to $5 million depending on the type of visas) into “eligible businesses” in Australia.

However, being new to Australia, business migrants are not familiar with businesses in Australia. Moreover, they usually do not speak fluent English and their business affairs in Australia have to be conducted through various professional advisors, such as accountant, migration agent, lawyer, business broker and sometimes their interpreter. It is common that business migrants rely on their trusted advisors to introduce and recommend business opportunities.

The important question is: How independent is the advisor?
In Australia, most of the professional advisors, once engaged, owe fiduciary duty to the client which dictates that the professional advisor must act in the best interest of their client at all times and must not involve in transactions that the personal interest of the advisor may be in conflict with the client’s interest. The essence of fiduciary obligations is that the fiduciary is precluded from acting in any other way than in the interests of the person to whom the duty to so act is owed. In short, the fiduciary obligation is one of ‘undivided loyalty’: Beach Petroleum NL v Kennedy (1999) 48 NSWLR 46–7.

Unfortunately, there are situations when this rule is not followed by professional advisors. Take for instance one common scenario, where the professional advisor receives some kind of fees (such as introduction fee or referral fee) from a third party for introducing the client to that third party, and the advisor failed to disclose and obtain consent from the client in relation to such fee arrangement.

This type of arrangement means significant risks are added to the investor’s investment because he could no longer fully trust the independency of the advisor. This may result in the investor investing into a “second-best” project simply because the “second-best” project gives a referral fee to the advisor whilst the better project did not. In the extreme case, however, this may result in the investor investing into a completely unviable project and ended up losing all or most of his investment funds. In the event that the investor is also a business migrant, it may have negative implications on the business migrant satisfying the migration requirements.

This type of arrangement is also problematic for the advisor. Despite the advisor may have acted in the best interest of the client, the advisor may have omitted to disclose his personal interests to the client and obtain informed consent from the client. The advisor may have “innocently” breached the fiduciary duty owed to the client. Such breach may result in a legal claim by the client against the advisor and the advisor facing disciplinary action from the regulatory body.
It is important that the investor and the advisor have clear communication about their respective goals and interests (including potential conflict of interests) prior to the engagement. If the investor “smells something fishy”, he should immediately seek clarification from the advisor.

On the other hand, if it ever appears to the advisor that his/her personal interest may be in conflict of the interest of the client, the advisor should immediately stop everything and seek consent from the client, failing which withdraws himself from acting for the client.

After separation, it is common that one of the partners may do all sorts of things to defeat any legitimate claims that the other partner may have in relation to his/her assets, including selling or transferring the assets to overseas or hidden it somewhere without trace. In some extreme cases, a partner may decide to spend or waste all the liquidated assets after separation, not for commercial reasons but to do it simply as retaliation.

The question many people frequently ask is how to prevent this from happening, before it is too late. In a situation like this, applying for injunction in the Family Court is usually the answer. An injunction is a court order to stop someone from doing something or, in some situations, to make someone doing something.

For property issues, you can get an injunction to stop your ex-partner from selling, mortgaging or otherwise dealing with a property. If the property has already been sold or the asset in question is cash, it is possible to obtain an order to ‘freeze’ bank accounts or an order to seize the cash or any valuables. Interestingly, there was a case in the Family Court in which the wife had successfully obtained a court order to seize a black leather briefcase belonged to the husband based upon the reasonable belief that the husband had kept substantial amount of cash in that briefcase – In the Marriage of Mazur (1991) 15 Fam LR 574.

In appropriate situations, the Family Court can also make orders and injunctions that affect third parties including for example an order to stop a trustee to deal with superannuation entitlements or an order to prevent a bank from selling a house.

An injunction under the Family Law Act is available to both married and divorced people, as well as to parties in a de facto relationship, including same-sex relationship. Typically, an injunction application is made on an urgent and ex-parte (meaning that it is made without any notice to the other party) basis. If the matter is particularly urgent, it is possible that the Family Court will hear your application on the same day when you filed the application, sometimes even outside usual court hours. If the application is ex parte, your ex-partner will not know anything about it until after the orders are made by the Family Court, which is designed to prevent the ex-partner from doing anything that may frustrate your claims while you are waiting for the court to hear your application.

Once an injunction is granted and while it is still valid, your ex-partner will be given the opportunity to challenge it. If your ex-partner files an application to oppose the injunction, the Family Court will hear the story from both sides and make a determination as to whether the injunction should remain. However, it is often that the purpose of stopping the ex-partner from taking any drastic actions about his/her assets is achieved by that time.

The key in an injunction application is usually timing. You are racing against time and sometimes if you acted a little too slow, you may forever lose the opportunity to stop your ex-partner from siphoning the assets beyond your ability to trace it. For this reason, if you have any concerns that your partner or ex-partner may be doing something in secret about the family assets, you need to act now before it’s too late.

KELVIN TANG is the Principal Partner of TANG Legal. His areas of practice include Investment Law, Commercial and Corporate Law, Property Law and Immigration Law. Relevant to this article, his expertise, knowledge and experience include representing property developers and new migrants with acquisition of property, structuring of investment vehicle, joint venture transaction, and advice on commercial transactions.

Email: [email protected]

Telephone: +618-9328 7525

I am often asked by new and perspective business migrants on whether they can invest in property for the purpose of satisfying the Australian Business Visa requirements. The good news is that it is possible. Investment in property may [emphasized] meet the migration requirements.

I must emphasize 2 important points: (1) Passive investment (and more specifically, provision of rental properties to the public) and smaller “project” based property development will NOT meet the migration requirements; and (2) Even if the migrant’s proposed business in property investment meets the State’s guidelines in bringing in substantial and exceptional benefits and thus obtained nomination by the State or Territory, this itself does NOT automatically mean that the Commonwealth migration requirements are met.

Under the Commonwealth migration regulations, a business migrant must satisfy three (3) conditions under the Act: (1) The business proposed or carried on by the migrant must be an “eligible business”; (2) The migrant must have obtained a substantial ownership interest in the eligible business; and (3) The migrant must actively participate at a senior level in the day-to-day management of the eligible business. If the migrant fails to satisfy these requirements, the Minister may cancel the visa. Hence, business migrant, please BEWARE!

This article briefly examines the “eligible business” requirement. In the case of Zhonghua v Minister for Immigration and Citizenship (BC201102754), the migrant, holder of sub-class 132 Business Talent visa, invested AUD$3,000,000 into a property development project. There were submissions by the migrant that application to re-zone the property was made to develop apartments. However, the Tribunal found that the investment did not pass the initial stage of purchasing the land. No actual development has taken place other than owning the land and making application to re-zone the land. For this reason, it cannot be described as a business. As such, the migrant’s investment did not satisfy the “eligible business” definition. However, what is important from this case is that in the judgment, the following comment was made by the presiding Senior Member, Mr Egon Fice: “… if the development proceeds, it might satisfy the eligible business definition in that it might create or maintain employment in Australia or result in commercial activity and competitiveness within sectors of the Australian economy.”

Further, under the case law, the test of what constitutes an “eligible business” requires more than just satisfying the conditions under the migration regulations. The Courts require that the business has repetitiveness of activities and some permanence characteristics: Puzey v Commissioner of Taxation [2003] FCAFC 197.

For the professionals who assist business migrants with their investment (such as migration agent, accountant, and real estate agent), you should find this article beneficial or at least relevant. Australian Courts have strict expectations that the requisite standard of care is met and professionals could be found personally liable for negligence or wrongdoing if the standard is not met. Here is a thought: What do you need to do (or must not omit to do), in order to meet the requisite standard of care?

For businesses seeking investment capital from the business migrant (for instance, property development company), beware of “representations” (such as statements and forecasts) that you make to the investor, buyer or migrant. If your representations are subsequently found to be false, even if it was not your intention to lie, you can be liable for damages for having engaged in “misleading or deceptive conduct” under the Consumer Act. This is a huge exposure to liability.

There are also cases where migrants have failed the “substantial ownership” requirement due to technical difference between legal ownership interest and beneficial interest. The ownership structure of the project company is extremely important. My next article will examine the ownership issue in more details.