Date: 20080306
Docket: A-186-07
Citation: 2008 FCA 87
CORAM: NADON
J.A.
SEXTON
J.A.
RYER
J.A.
BETWEEN:
MOMIN RAHIM
Appellant
and
THE MINISTER OF CITIZENSHIP
AND IMMIGRATION
Respondent
REASONS FOR JUDGMENT
RYER J.A.
[1]
This is an
appeal from a decision of Mactavish J. (2007 FC 310) in which she dismissed an
application for judicial review of a decision of a visa officer denying the
application of Mr. Momin Rahim for a permanent resident visa, as an
entrepreneur, pursuant to subsection 11(1) of the Immigration and Refugee
Protection Act, S.C. 2001, c. 27 (the “Act”) and in accordance with
subsection 10(1) of the Immigration and Refugee Protection Regulations,
S.O.R./2002-227 (the “Regulations”).
[2]
The issue
in this appeal relates to the appropriate test to be applied with respect to
the determination of whether Mr. Rahim had control of certain shares of a
corporation, a condition of the definition of business experience that Mr.
Rahim is obliged to meet to succeed in his application for a permanent resident
visa as a member of the entrepreneur class.
BACKGROUND
[3]
Mr. Rahim
is a Pakistani citizen who moved from Pakistan to Texas in 1994. While in Texas, he was involved in the operation of a
number of small businesses. One of those businesses is Quality Enterprises Inc.
(the “corporation”), a corporation which owned and operated a gas station and
convenience store. The incorporation date of the corporation is November 14,
2000.
[4]
At the
time of the organization of the corporation on November 20, 2000, Mr. Rahim was
not a lawful resident of the United
States. For that
reason, Mr. Rahim stated that he did not want to have any of the issued shares
registered in his name. Accordingly, 40% of the shares of the corporation were
registered in his spouse’s name and the remaining 60% were registered in the
name of Mr. Rahim’s friend, Mr. Abdul Noormohd Ali. The share certificates in
respect of these issued shares are dated November 20, 2000.
[5]
In 2003, a
trust document was executed by Mr. Rahim, as trustor, and Mr. Ali, as trustee.
In that document, Mr. Ali declared that all of Mr. Rahim’s right, title and
interest in and to 60% of the shares of the corporation had previously been
transferred by Mr. Rahim to him. The trust document indicates that the transfer
of the shares by Mr. Rahim occurred on November 14, 2000, the date upon which
the corporation was incorporated. However, the shares were not issued until
November 20, 2000, the date upon which the corporation was organized. Under the
terms of the trust document, the trust is revocable at any time by Mr. Rahim,
in which event all of the trust property will be transferred by Mr. Ali to Mr.
Rahim.
[6]
Mr. Rahim
applied for a permanent resident visa on the basis that he is an entrepreneur,
within the meaning of subsection 88(1) of the Regulations.
[7]
Pursuant
to subsection 97(1) of the Regulations, the entrepreneur class is prescribed as
a class of persons, for the purposes of subsection 12(2) of the Act, who may
become permanent residents on the basis of their ability to become economically
established in Canada. To qualify for a permanent
resident visa as an entrepreneur, the applicant must meet a number of conditions,
one of which is that the applicant must have business experience, as defined in
subsection 88(1) of the Regulations. The essential elements of that definition
are that the applicant must have two years of experience in the management of a
qualifying business and must have control of a percentage of equity, as defined
in subsection 88(1) of the Regulations, of the qualifying business. Where the
qualifying business is undertaken by a corporation, the percentage of equity
means the percentage of the issued and outstanding voting shares of the
corporation controlled by the applicant or the spouse or common-law partner of
the applicant. The issue in this appeal relates to the requirement of control
of a percentage of equity of a corporation.
[8]
The visa officer
stated that the documentary evidence showed that Mr. Rahim set up a trust
whereby he had turned over his rights, titles and 60% interest in the issued
shares of the corporation to Mr. Ali and accordingly, the visa officer
considered that Mr. Rahim had relinquished his equity in the corporation. The
visa officer concluded that Mr. Rahim did not meet the business experience
requirement of the definition of entrepreneur in subsection 88(1) of the
Regulations and, therefore, rejected Mr. Rahim’s application.
APPLICABLE PROVISIONS OF THE REGULATIONS
[9]
The
relevant provisions of the Regulations are as follows:
|
"business experience" , in respect of
…
(b) an entrepreneur,
other than an entrepreneur selected by a province, means 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;
|
«expérience dans l’exploitation d’une
entreprise» :
[…]
b) s’agissant d’un
entrepreneur, autre qu’un entrepreneur sélectionné par une province, 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;
|
|
"entrepreneur" means a foreign national who
(a)
has business experience;
|
entrepreneur» Étranger qui, à la fois :
a) a de l’expérience dans l’exploitation d’une
entreprise;
|
|
“percentage of equity" means
…
(b)
in respect of a corporation, 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;
|
pourcentage des capitaux propres»
[…]
b) dans le cas d’une société par actions, 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;
|
The Decision of the Federal Court
[10]
Mr. Rahim
applied to the Federal Court for judicial review of the decision of the visa
officer rejecting his application. Mactavish J., of the Federal Court, found
that Mr. Rahim owned 60% of the shares of the corporation and that he
transferred those shares to Mr. Ali, as trustee, pursuant to the trust document.
The Federal Court also found that the trust can be revoked at any time by Mr.
Rahim.
[11]
In
upholding the decision of the visa officer, the Federal Court held that the
test to be applied in the determination of whether an applicant controlled a
percentage of equity of a qualifying business, as required by the definition of
business experience in subsection 88(1) of the Regulations, had been
established in Huang v. Canada (Minister of Citizenship and Immigration),
2006 FC 507. According to the Federal Court, that test is whether the applicant
had legal or de jure control over the shares in question. The Federal
Court concluded that Mr. Rahim did not have legal control over the shares of
the corporation because that control had been transferred to Mr. Ali, even
though Mr. Rahim could have regained that control at any time by revoking the
trust.
[12]
The
Federal Court held that the trust document did not impose any limitation on the
capacity of the trustee to vote the shares of the corporation and that the
voting rights attached to those shares would have to be considered in the de
jure control analysis, citing Duha Printers (Western) Ltd. v. Canada,
[1998] 1 S.C.R. 795.
[13]
The
Federal Court went on to question whether the de jure control test that
was developed in an income tax context is appropriate in an immigration context.
In particular, in the context of subsection 88(1) of the Regulations, the
purpose of which is to identify potential new immigrants who have demonstrated
entrepreneurial skills that would be transportable to Canada, the Federal Court
indicated that a de facto control test would seemingly be more
appropriate.
[14]
Nonetheless,
the Federal Court held that Mr. Rahim had not shown that the test in Huang
was manifestly wrong and in the interests of judicial comity, the Federal Court
decided to follow Huang and upheld the decision of the visa officer.
[15]
The
Federal Court held that the interpretation of the phrase “the control of a
percentage of equity of the qualifying business” in subsection 88(1) of the
Regulations is an important legal question and certified the following
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?
ANALYSIS
Huang
[16]
The basis
of the decision of the Federal Court with respect to the test for control of
shares of a corporation for the purposes of the definition of business
experience in subsection 88(1) of the Regulations lies in the decision in Huang.
[17]
In Huang,
the shares of the corporation in question were held in trust for the applicant,
Ms. Huang, by her father. The visa officer held that the applicant’s father had
“all authority” over the shares in question in his capacity as trustee and,
therefore, Ms. Huang did not control those shares. Lemieux J. found that in
reaching this decision, the visa officer adopted a de jure control test.
Lemieux J. stated that the de jure test is the proper test to determine
control of a corporation for income tax purposes, citing the income tax cases
of Buckerfield’s Limited v. Canada (Minister of National Revenue, [1965]
1 Ex. C.R. 299 and Duha Printers, seemingly as implicit authority for
the proposition that the same test should be applied with respect to the matter
of control of shares for the purposes of the definition of business experience
in subsection 88(1) of the Regulations. Lemieux J. went on to find that the
visa officer was justified, based on the evidence before him, in concluding
that Ms. Huang did not control the shares in question and that any ambiguity in
the trust documentation counted against her, since she had the burden of
satisfying the visa officer that she met the requirements of the Act and the
Regulations.
[18]
In my
view, the cases cited by Lemieux J. as authority for the de jure control
test with respect to the determination of who, if anyone, controls a corporation
for income tax purposes do not provide authority for the proposition that a de
jure control test is applicable with respect to the determination of
whether a person controls shares for the purposes of the definition of business
experience in subsection 88(1) of the Regulations. With respect, income tax
legislation and immigration legislation are based upon significantly different
considerations. Moreover, the tests in Buckerfield’s and Duha
Printers deal with control of a corporation, whereas the test to be applied
under the applicable provisions of the Regulations deals with control of shares
of a corporation.
Effective Control
[19]
The Court
referred the parties to the decision of this Court in Cloutier v. Canada (Minister of National
Revenue),
[1987] 2 F.C. 222; 1986 F.C.J. No. 778, a decision that interpreted the concept
of control of shares in the context of the Unemployment Insurance Act, 1971,
S.C. 1970-71-72, c. 48 and the Unemployment Insurance Regulations,
C.R.C., c. 1576. In that case, the issue was whether Mr. Cloutier retained
control over certain shares that he had deposited in trust to provide security
for a loan that he had received. Marceau J.A. held, at paragraph 5, that in the
context of the particular provision of that legislation, control could be
interpreted as effective control, which he described as follows:
… effective
control, which means control that can be freely exercised and is not impeded by
circumstances independent of the person having control.
Applying this test, Marceau J.A. found that while the shares
were the subject of the trust arrangement, Mr. Cloutier was not free to deal
with them and accordingly, he did not have effective control of them.
[20]
In my
view, the effective control test in Cloutier is consistent with the language
of the definitions of business experience and percentage of equity that are
found in subsection 88(1) of the Regulations, as well as the purpose of the
provisions of the Regulations which deal with immigration by entrepreneurs.
Accordingly, I adopt this definition. I would also add that both counsel at the
hearing agreed that this definition was appropriate.
Application - Huang
[21]
While the
decision in Huang is not under review, I would observe that the
application of the effective control test to the facts in that case would likely
have produced the same result. In that case, the evidence established that Ms.
Huang was unable to deal with the shares that were held in trust for her and as
a result, I do not believe that she would have met the effective control test.
Application in the Present Circumstances
[22]
The Crown
expressed some concern as to whether the documentation in the record adequately
supported the factual findings of the visa officer and the Federal Court. The
Crown correctly pointed out that on November 14, 2000, no shares of the
corporation had been issued, such issuance having occurred six days later. This
discrepancy was not the subject of comment by either the visa officer or the
Federal Court and nothing in the record expressly explains it. However, it
appears to be a simple mistake in that the date of incorporation of the
corporation was included in the trust document rather than the date upon which
the shares of the corporation were issued.
[23]
Having
correctly pointed out this discrepancy to the Court, the Crown did not contend
that this or any other documentary discrepancy should be considered to be a
basis upon which any of the factual findings of the visa officer and the
Federal Court, including the finding that Mr. Rahim owned 60% of the shares of
the corporation and transferred those shares to Mr. Ali as his trustee, should
be set aside. Instead, the Crown’s argument was focused on the legal test for
control of the shares of the corporation and, as noted above, the Crown agreed
that the effective control test referred to above was the appropriate one.
[24]
In the
present circumstances, Mr. Rahim has always been in a position to have the
shares of the corporation transferred to him by revoking the trust. His power
to do so is unfettered and can be freely exercised. While he caused those
shares to be held in trust for a reason, at any time he wishes to do so, he can
cause those shares to be transferred to himself and registered in his name. Mr.
Rahim’s circumstances are, in this important respect, fundamentally different
from the circumstances of Mr. Cloutier, who could not deal with his shares
without first repaying the loan in respect of which those shares stood as
security, and Ms. Huang, who had no apparent ability at all to gain control of
the shares that were held in trust for her. Accordingly, I am of the view that
Mr. Rahim has, and has always had, effective control over the shares of the
corporation that are held in trust for him by Mr. Ali and has, therefore,
demonstrated that he meets the requirement of control of a percentage of equity
of the qualifying business in subsection 88(1) of the Regulations.
DISPOSITION
[25]
I would
answer the first part of the certified question in the negative and the second
part by reference to paragraphs 19 and 20 of these reasons.
[26]
For the
foregoing reasons, I would allow the appeal, with costs, and set aside the
decision of the Federal Court. I would allow the application for judicial
review, with costs, set aside the decision of the visa officer denying Mr.
Rahim’s application for a permanent resident visa and refer the matter back to
the Minister for reconsideration in accordance with these reasons.
“C.
Michael Ryer”
“I
agree.
M.
Nadon J.A.”
“I
agree.
J.
Edgar Sexton J.A.”
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