Ottawa, Ontario, March 22, 2007
PRESENT: The Honourable Madam Justice Mactavish
BETWEEN:
and
AND IMMIGRATION
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:
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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:
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… 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:
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… 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?
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: IMM-1835-06
STYLE OF CAUSE: MOMIN RAHIM v. MCI
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: February 21, 2007
APPEARANCES:
Ian Hicks FOR RESPONDENT
SOLICITORS OF RECORD:
Cecil Rotenberg FOR APPLICANT
Barrister and Solicitor
Toronto, Ontario
John H. Sims, Q.C. FOR RESPONDENT
Deputy Attorney General of Canada
Department of Justice
Ontario Regional Office