Date: 20070322
Docket: IMM-1835-06
Citation: 2007 FC 310
Ottawa, Ontario, March 22,
2007
PRESENT: The Honourable Madam Justice Mactavish
BETWEEN:
MOMIN
RAHIM
Applicant
and
THE MINISTER OF CITIZENSHIP
AND
IMMIGRATION
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1]
To
qualify for a permanent resident visa as an entrepreneur, an applicant is
required to have two years of business experience, amongst other things.
“Business experience” is defined in the Immigration and Refugee Protection
Regulations as experience in the management of a qualifying business, and
the control of a percentage of equity in that business.
[2]
The
narrow issue presented by this application for judicial review is whether the
word “control” as it is used in the Regulations means the legal control of a
percentage of the equity of the business in question, or whether it extends to
include the de facto control of the shares in issue.
[3]
For
the reasons that follow, I adopt the reasoning in Huang v. Canada (Minister
of Citizenship and Immigration), 2006 FC 507, and find that the term “the
control of a percentage of equity”, as the phrase is used in subsection 88(1)
of the Immigration and Refugee Protection Regulations, refers to the
legal control of the shares in the qualifying business. Given that this was
the interpretation given by the visa officer in this case, it follows that the
application for judicial review must be dismissed.
Background
[4]
Momin
Rahim and his spouse are citizens of Pakistan who emigrated to the United
States
in April of 1994. While the family was living in Austin, Texas, Mr.
Rahim operated a number of small businesses, the most successful of which
appears to have been Quality Enterprises Inc.
[5]
Quality
Enterprises Inc. owned a gas station and convenience store, which operated as a
“Quick Stop”. Mr. Rahim owned 60% of the shares in Quality Enterprises Inc.,
and his spouse owned the remaining 40%.
[6]
There
is no information before the Court with respect to the class or classes of
shares issued by the company, or whether all of the shares in issue are voting
shares. The visa officer and both of the parties have approached this case on
the assumption that all of the issued shares are indeed voting shares, and I
will also proceed on that basis.
[7]
Mr.
Rahim and his spouse were living in the United States without
status. Fearful that he could be deported at any time, Mr. Rahim transferred
his shares in Quality Enterprises Inc. to his friend Ali Abdul, for Mr. Abdul
to hold in trust for Mr. Rahim. Mr. Rahim believed that this arrangement would
permit the orderly and rapid winding up of the company, and the distribution of
the assets, if he were ordered deported.
[8]
The
remaining 40% of the shares in Quality Enterprises Inc. remained in the hands
of Mr. Rahim’s spouse, who was in the process of obtaining legal status in the United
States.
[9]
Mr.
Rahim contends that for all intents and purposes, he maintained complete
control over the day to day management of the business. Indeed, he says that
the only function that Mr. Abdul performed as the trustee of Mr. Rahim’s shares
was to sign tax documents.
[10]
On
April 28, 2003, Mr. Rahim applied for a permanent resident visa to enter Canada as part of
the entrepreneur class.
The Decision of the Visa
Officer
[11]
By
letter dated February 14, 2006, Mr. Rahim was informed that he did not qualify
for a permanent resident visa as an entrepreneur, as that term was defined in
subsection 88(1) of the Immigration and Refugee Protection Regulations.
This decision was based on the visa officer’s conclusion that Mr. Rahim did not
have the required two years business experience in a qualifying business as
required by subsection 88(1).
[12]
According
to the officer, the fact that Mr. Rahim had established a Trust whereby he had
turned over his rights, title to and 60% interest in Quality Enterprises Inc.
to Mr. Abdul indicated that he had relinquished his equity in and management of
the business.
[13]
Moreover,
although Mr. Rahim had provided evidence of an equity interest in a second
business, “Exin, LLC”, that business had only been in operation for 13 months.
As a result, Mr. Rahim could not have claimed to have had the requisite two
years of qualifying experience in relation to that business.
[14]
Mr.
Rahim’s application for a permanent resident visa was thus rejected, without
further assessment.
The Legislative Regime
[15]
In
order to understand the issue raised by this application, it is necessary to
have an understanding of the legislative regime involved in the assessment of
applicants seeking permanent residency in Canada as members
of the entrepreneur class.
[16]
The
starting point is section 97 of the Immigration and Refugee Protection
Regulations, which provides that:
|
97. (1) For the purposes of subsection 12(2) of the
Act, the entrepreneur class is hereby prescribed as a class of persons who
may become permanent residents on the basis of their ability to become
economically established in Canada and who are entrepreneurs within the
meaning of subsection 88(1).
(2) If a foreign national who makes an application as a
member of the entrepreneur class is not an entrepreneur within the meaning of
subsection 88(1), the application shall be refused and no further assessment
is required.
|
97. (1)
Pour l’application du paragraphe 12(2) de la Loi, la catégorie des
entrepreneurs est une catégorie réglementaire de personnes qui peuvent
devenir résidents permanents du fait de leur capacité à réussir leur
établissement économique au Canada et qui sont des entrepreneurs au sens du
paragraphe 88(1).
(2) Si le demandeur au titre de la catégorie
des entrepreneurs n’est pas un entrepreneur au sens du paragraphe 88(1),
l’agent met fin à l’examen de la demande et la rejette.
|
[17]
Subsection
88(1) of the Regulations is the definition section. “Entrepreneur” is defined
in subsection 88(1) as someone who, amongst other things, has “business
experience”. “Business
experience” is defined as:
|
… a minimum of two years of experience consisting of two
one-year periods of experience in the management of a qualifying business and
the control of a percentage of equity of the qualifying business during
the period beginning five years before the date of application for a
permanent resident visa and ending on the day a determination is made in
respect of the application;
|
… s’entend de l’expérience d’une durée
d’au moins deux ans composée de deux périodes d’un an d’expérience dans la
gestion d’une entreprise admissible et le contrôle d’un pourcentage des
capitaux propres de celle-ci au cours de la période commençant cinq ans
avant la date où la demande de visa de résident permanent est faite et
prenant fin à la date où il est statué sur celle-ci;
|
[18]
It
is not necessary to set out the definition of "qualifying business",
as nothing turns on it in this case. However, it should be noted that insofar
as the qualifying business is a corporation, the term "percentage of
equity" is defined as:
|
… the percentage of the issued and outstanding voting
shares of the capital stock of the corporation controlled by a foreign
national or their spouse or common-law partner;
|
… la part des actions du capital social
avec droit de vote émises et en circulation que contrôle l’étranger ou son
époux ou conjoint de fait;
|
Issue
[19]
The primary
issue arising in this application is whether the visa officer erred in
interpreting the phrase “the control of a percentage of equity”, as the phrase
is used in subsection 88(1) of the Immigration and Refugee Protection
Regulations, as requiring the legal control of the shares in issue, or
whether it is sufficient if the applicant has the de facto control of
the shares.
Standard of Review
[20]
In Huang
v. Canada (Minister of Citizenship and Immigration), 2006 FC 507, the Court
was also called upon to interpret the word “control” used in subsection 88(1)
of the Immigration and Refugee Protection Regulations. The Court
identified the issue as a question of law, and concluded that as such, it
should be reviewed against the standard of correctness.
[21]
I agree
with the Court’s characterization of the nature of the question, and with the
conclusion that the standard of review is indeed one of correctness. Indeed, I
do not understand there to be any disagreement between the parties on this
point.
The Terms of the Trust Deed
[22]
Before
turning to address the issue in this case, it is, in my view, necessary to have
an appreciation of the terms of the Trust Deed between Mr. Rahim as Settlor
(or, as the Trust Deed calls him, the “Trustor”), and Mr. Abdul as Trustee.
[23]
Pursuant
to the terms of the Trust Deed, the property Mr. Rahim settled on the trust was
“all of the Trustor’s right, title, and interest in and to Sixty (60%) Percent
interest in Quality Enterprises Inc., a Texas corporation”.
[24]
Amongst
other things, the Trust Deed provides that all of the net income of the trust
is to be paid to Mr. Rahim, and states that all capital improvements or repairs
involving the expenditure of more than $10,000 require Mr. Rahim’s approval.
[25]
Other
provisions of the Trust Deed that are of note include the stipulation that the
trust is to continue for Mr. Rahim’s lifetime, and shall then terminate. Upon
Mr. Rahim’s death, all of the assets of the trust are to be paid as directed by
Mr. Rahim, after all debts have been paid.
[26]
That
said, the Trust Deed also provides that the trust can be revoked at any time by
Mr. Rahim.
[27]
Finally,
there is nothing in the Trust Deed that imposes any limitation or restriction
on the ability of the Trustee to vote the shares.
[28]
With
this understanding of the relevant terms of the Trust Deed in issue, I turn now
to address the issue raised by this application.
Analysis
[29]
Mr.
Rahim submits that notwithstanding the terms of the Trust Deed, he continued to
manage the Quick Stop on a day to day basis. Moreover, even though his shares
in Quality Enterprises Inc. were nominally controlled by Mr. Abdul, Mr. Rahim
continued to have de facto control over his shares.
[30]
Mr.
Rahim points out that one of the stated objectives of the Immigration and
Refugee Protection Act is to "support the development of a strong and
prosperous Canadian economy, in which the benefits of immigration are shared
across all regions of Canada": see paragraph
3(1)(c). To this end, subsection 12(2) of IRPA provides that foreign
nationals may be selected as members of the economic class on the basis of
their ability to become economically established in Canada.
[31]
Mr.
Rahim submits that it would be unduly technical to interpret subsection 88(1)
to limit its application to cases where an applicant has legal control over a
percentage of the equity in the business in question. Rather, the term should
be interpreted more expansively, so as to encompass cases such as this, where
the applicant retains de facto control over the shares in question,
notwithstanding the fact that legal control may technically vest in another.
[32]
In
this regard, Mr. Rahim relies on Thomas v. Canada (Minister of Citizenship
and Immigration), 2006 FC 334, where the Court took a more expansive view
of the selection criteria used in relation to entrepreneurs, albeit in a
different context.
[33]
As
was noted earlier, in the Huang case previously cited, the Court was
called upon to determine whether the term “the control of a percentage of
equity” as it appears in subsection 88(1) of the Regulations refers strictly to
individuals with de jure control over their shares, or extends to
encompass individuals who are the beneficial owners of the voting shares in
issue.
[34]
In
this regard, the Court held that:
32 …[T]he Immigration Officer applied
the proper test to determine the control of a percentage of equity which, in
the case of a corporation, is defined as the percentage of the issued and
outstanding voting shares of the capital stock of the corporation controlled by
a foreign national or their spouse or common-law partner.
33 It is clear from the Immigration
Officer's decision, when that decision is read in its entirety, the test he
applied to determine the control of the shares in the truck stop said to be
attributable to the applicant was by inquiring who had the legal control of
those voting shares. The test the Immigration Officer adopted was a de jure
control as opposed to a factual control of those shares. This is the proper
test to determine the control of a corporation. I refer to two cases. The
first case is Buckerfield's Ltd. v. Canada (Minister of National Revenue)
[1965] 1 Ex. C.R. 299 where that control was defined as "the right of
control that rests in ownership of such a number of shares as carries with it
the right to a majority of the votes in the election of the Board of
Directors". The Buckerfield's test was reaffirmed by the Supreme
Court of Canada in Duha Printers (Western) Ltd. v. Canada [1998] 1
S.C.R. 795.
34 Counsel for the applicant says
that the Immigration Officer should have been thinking of the control of the
ownership of the shares. I cannot subscribe to this argument as it would amount
to re-writing the test established in section 88 of the Regulations, that is,
control by a foreign national of the percentage of the issued and outstanding
voting shares in the capital stock of the corporation.
…
36 Based on the evidence before him,
it was reasonably open to the Immigration Officer to arrive at the conclusion
he did, that is, the applicant did not have the control of the percentage of
the issued and outstanding voting shares of the capital stock of the truck stop
because her share of the business was held in trust for her by her father.
[emphasis added]
[35]
Counsel
for Mr. Rahim submits that the Huang decision is distinguishable from
the present case, as the applicant in Huang never exercised any managerial
control over the business in question. In contrast, although the Trust Deed in
this case provides that all property that is subject to the trust is to be
managed in accordance with the provisions of the Trust Deed, the document does
not make any express provision for the day to day management of the business.
In this regard, the uncontroverted evidence before the visa officer was that
Mr. Rahim continued to exercise de facto control over the day to day
management of the business.
[36]
There
are two problems with this submission. Firstly, it is not accurate to say that
the applicant in Huang did not have any managerial experience. A review
of the Huang decision, specifically paragraph 30 of the reasons,
discloses that the applicant in that case had several years of managerial
experience.
[37]
The
second problem with counsel’s submission is that in Huang, the question
of managerial experience was ultimately found to be irrelevant to the visa
officer’s determination. In this regard, the Court observed that it was
unnecessary for the visa officer to consider the question of the applicant’s
managerial experience, as the officer was not satisfied that the applicant had
control of a percentage of equity of the business in question for the reasons
cited above. The
same may be said about Mr. Rahim’s case.
[38]
There
is, however, one noteworthy distinction between the Huang case and that
of Mr. Rahim. That is, in this case, the Trust set up by Mr. Rahim is clearly
revocable at his option, whereas there is nothing in the brief trust instrument
recited in Huang that would suggest that the Trust in issue in that case
was revocable.
[39]
Thus,
while Mr. Rahim admittedly did not legally control the shares in Quality
Enterprises Inc. at the time that he applied for a permanent resident visa, he
could have regained that control at any time, simply be revoking the Trust.
This does not appear to have been the case in Huang.
[40]
That
said, in Huang, the Court clearly determined that the appropriate test
to be applied in determining whether an applicant controlled a percentage of
equity of the qualifying business was whether the applicant had legal or de
jure control over the shares in question.
[41]
While
Mr. Rahim could undoubtedly have regained control over his shares in Quality
Enterprises Inc. by revoking the Trust, it is undisputed that at the time that
he applied for a permanent resident visa, Mr. Rahim did not have legal control
over his shares, as that control had been transferred to Mr. Abdul.
[42]
Moreover,
the Trust Deed did not impose any limitation on the capacity of the Trustee to
vote the shares that would have to be taken into account in the de jure
control analysis: see Duha Printers (Western) Ltd., previously cited, at
¶ 49.
[43]
The Buckerfield's
and Duha Printers test of de jure control was developed in
the income tax context, and it seems to me to be at least arguable that such a
strict test is not appropriate in cases such as this.
[44]
The
purpose underlying subsection 88(1) of the Immigration and Refugee
Protection Regulations is to identify applicants who have proven their
ability to establish and operate economically viable enterprises in other
countries, and would therefore presumably be able to do so in Canada. A consideration of
whether an applicant controls a percentage of the equity in a qualifying
business in fact, as opposed to in law, would, it seems to me, better achieve
the purpose of the legislation.
[45]
That
said, Mr. Rahim has not persuaded me that the test for control identified in Huang
is manifestly wrong. As a consequence, in the interests of judicial comity, I
will follow Huang, and find that the visa officer was correct in
concluding that at the time that he applied for a permanent resident visa, Mr.
Rahim did not have control over a percentage of the equity in Quality
Enterprises Inc.
[46]
As a
consequence, Mr. Rahim’s application for judicial review must be dismissed, and
it is unnecessary to determine whether the officer erred in concluding that in
creating the Trust, Mr. Rahim had also relinquished control over the management
of the business in question.
Certification
[47]
Counsel
for Mr. Rahim proposes the following question for certification:
Is the word ‘control’, as used in the
definition of entrepreneur, one which requires a broad literal meaning with the
intent that its purpose is to attract people with substantial track records in
business as well as ownership, independently however of the actual legal manner
in which that ownership is expressed, provided the visa officer or the
reviewing Court is satisfied that they are the owner?
[48]
The
interpretation of the phrase “the control of a percentage of equity of the
qualifying business” as it appears in subsection 88(1) of the Immigration
and Refugee Protection Regulations is a question of law – one which will
undoubtedly affect other applicants for permanent resident visas in the
entrepreneur class. As a result, I am satisfied that this case raises a
serious issue of general importance, and I am prepared to certify the following
reformulated question:
Does the phrase “the control of a
percentage of equity of the qualifying business”, as it appears in subsection
88(1) of the Immigration and Refugee Protection Regulations, refer only
to the legal or de jure control of the shares in issue, or does it
include cases where an applicant may have de facto control over the
shares in question, notwithstanding the fact that legal control over the shares
may temporarily rest in another person?
JUDGMENT
THIS COURT ORDERS AND ADJUDGES
that:
1. This application for
judicial review is dismissed; and
2. The following question of
general importance is certified:
Does the phrase “the control of a
percentage of equity of the qualifying business”, as it appears in subsection
88(1) of the Immigration and Refugee Protection Regulations, refer only
to the legal or de jure control of the shares in issue, or does it
include cases where an applicant may have de facto control over the
shares in question, notwithstanding the fact that legal control over the shares
may temporarily rest in another person?
“Anne
L. Mactavish”
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