How to invest: Court of Appeal gives important guidance to entrepreneurs
Sajjad’s Grill and Restaurant
- Investment requirements
- A Third Way?
- Direct cash investment
- Better safe than sorry
One of the requirements for Tier 1 (Entrepreneur) migrants extending their visas in the UK is to show they have invested £200,000 that they previously showed was available for investment in their initial applications.
The important case of R (Sajjad) v SSHD  EWCA Civ 720 is about the ways in which entrepreneur migrants can do this. It is a textbook example of the lack of flexibility and confusion inherent in the Points Based System, and required reading for migrants in this route considering how to invest their funds.
Sajjad’s Grill and Restaurant
Mr Sajjad had arrived in the UK in 2011 as a Tier 1 (Entrepreneur) migrant and set up his business, which latterly traded as Sajjad’s Grill and Restaurant.
It was common ground in the case that Mr Sajjad had transferred almost £500,000 from himself personally to his UK company.
However, as the Home Office took the view he had not done this in one of the ways prescribed by the Immigration Rules, an extension application was refused on 27 May 2015.
After a lot of legal wrangling, almost four years later, Mr Sajjad ended up in the Court of Appeal where his appeal against refusal of permission to apply for judicial review was dismissed last week.
The Immigration Rules are very specific about how the required £200,000 investment must be shown.
The fact that – as the Home Office accepted – almost £500,000 had been transferred into the company by Mr Sajjad was not enough.
One of the ways in which investment can be shown is by way of a director’s loan. In a letter from his accountants submitted with the application, the accountant had referred to the funds transferred to the company by Mr Sajjad as just that.
But the Immigration Rules require that a director’s loan agreement be supplied containing certain information about the nature of the loan, and confirming that it was unsecured and subordinated in favour of third-party creditors. No such agreement was supplied and the extension application was refused.
A Third Way?
On the narrow point, the case is uncontroversial. The Home Office (not unreasonably in the context of the strict nature of the Points Based System rules) took the funds transferred by Mr Sajjad to be a director’s loan based on the letter from the accountant. In order to rely on this form of investment he should have supplied a director’s loan agreement, which he did not.
This is harsh on the individual in the case, and is yet anotherexample of the spirit (if not the letter) of the Rules being met, but where no flexibility is shown to the refused applicant on the receiving end.
But the really interesting (and worrying) part about this case is that the Secretary of State argued that there were only two permissible methods of investing funds for Tier 1 (Entrepreneur) migrants. Counsel suggested
that the effect of paragraphs 46 and 46-SD is that an applicant for leave to remain under the PBS, who seeks an award of points on the basis of an investment in a UK business, must establish that the investment has taken one of only two permissible forms: investment by way of a director’s loan, or investment by way of purchase of share capital.
Paragraph 27; emphasis added
This submission directly contradicts the Tier 1 (Entrepreneur) guidance, which states as follows:
This page tells you the types of investment you can accept for the award of points.
Direct cash investment
To make sure the money is used by the business, the applicant must provide the accounts of that business for assessment. These accounts must show the investment in money made directly by the applicant, in their own name.
If the applicant has invested by way of share capital, the business accounts must show the shareholders, the amount and value of the shares (on the date of purchase) in the applicant’s name as it appears on their application. …
This only applies to migrants who become directors of a company. A director’s loan to the company will be considered for the award of points as long as it is unsecured and subordinated in favour of third-party creditors. …
I count three methods of investment there.
Although the court does entertain the possibility of investment via a gift, the “direct cash investment” method is not mentioned in the judgment. Presumably the Court of Appeal did not have this guidance before it.
And although the bench did not express a conclusive view on the submissions made by the Secretary of State (that there were only two conceivable methods of investment, not three), it made fairly strong noises of agreement with the Home Office position as expressed in submissions (see Lord Justice Holroyde at paragraph 34, and Males LJ at 40).
So, amazingly, in the face of contrary submissions by counsel for the Secretary of State, it was left to Mr Sajjad to attempt to justify and explain to the Court of Appeal the policy basis for, and existence of, a third method of investment permitted by the Home Office, as set out in its own guidance.
Direct cash investment
In the case Mr Sajjad argued that his investment
took the form of his crediting the company’s bank account and then using the funds to develop the business … but … that there was no “director’s loan” for the purposes of Annex A, paragraph 46-SD
He made the point that, on the face of the rules
Where the investment takes the form of a director’s loan, or a purchase of shares, then paragraph 46-SD requires specified documents to be provided; but other forms of investment, such as the appellant made, do not impose any comparable obligation beyond what is contained in sub-paragraphs 46-SD(a)(ii) and (b).
And looking at the Home Office guidance set out above, this appears to be the position.
However, as Mr Sajjad had submitted evidence which suggested his investment was a loan, not direct cash investment, and had not produced a loan agreement, the Court of Appeal did not feel the need to make a finding on this point (which would have been helpful).
Indeed, this appears to be the first senior judicial consideration of methods of investment in Tier 1 (Entrepreneur) extension applications, provisions which have been in operation for over ten years now.
Practitioners (and judges) occasionally complain about the deluge of decisions from the higher courts, making it more difficult to understand the law on any given point. But sometimes judicial scrutiny is the sunlight the Immigration Rules need to identify potential contradictions, as here.
Better safe than sorry
Following this judgment, and pending any clarification from the Home Office, it would probably be advisable for any Tier 1 (Entrepreneur) migrants who are considering injection of funds by way of ‘direct cash investment’ as permitted by the relevant guidance to instead invest by way of director’s loan or share issue.
The case provides yet further evidence of the complexity of the Immigration Rules in general, and typifies the issues with the Tier 1 (Entrepreneur) route, which has had a 50% refusal rate going back to 2013.
Carer for 87-year-old British woman allowed to stay in the UK after Zambrano appeal
An adult primary carer of a British citizen can acquire a derivative right to reside under EU law, the Court of Appeal has said in MS (Malaysia) v Secretary of State for the Home Department  EWCA Civ 580.
On the facts, it is surprising that the Secretary of State tried to appeal this case from the Upper Tribunal. The appeal concerned a 58-year-old citizen of Malaysia. Her mother was an 87-year-old British citizen, who suffered from short-term memory loss, deteriorating eyesight, diabetes, hypertension, heart failure, chronic kidney disease, osteoarthritis and peripheral vascular disease. It was accepted throughout that MS was responsible for showering, dressing, feeding and providing 24/7 care to her mother. The Home Office nevertheless refused her a residence card.
The First-tier Tribunal sensibly found that the care provided by social services would not be an adequate alternative and would substantially affect the quality and standard of the mother’s life (an argument which usually fails in similar cases).
The court reviewed various Zambrano-esque authorities from the Court of Justice of the European Union, all of which pointed to the same legal test: that it would be unlawful to refuse a right to reside to the primary carer where the British citizen would have to leave the EU and thereby lose the rights that flow from their EU nationality. That is a high test, as the court noted when referring to the Court of Justice opinion in C-82/16 K.A. v Belgium:
an adult is, as a general rule, capable of living an independent existence apart from the members of his family. It follows that the identification of a relationship between two adult members of the same family as a relationship of dependency, capable of giving rise to a derived right of residence under Article 20 TFEU, is conceivable only in exceptional cases…
Things are not made easier by the Home Office’s guidance on derivative rights of residence. It says that the level of evidence needed to establish a right to reside where someone is caring for an adult will be “significantly higher” than in cases involving children. Only evidence that a person was dependant “due to a severe physical or mental disability is likely to being a person within scope of the 2016 regulations”.
Thankfully, the court avoided putting an extra gloss on the words of the Court of Justice. It said simply:
Whether the boundary (which has impediment on the right to reside on one side and compulsion to leave on the other) is crossed is clearly a matter of fact and degree. What is necessary in each case is to examine the character and quality of the relationship of dependency… because it is that dependency which would lead to the Union citizen being obliged, in fact, to leave the territory of the Union.
The test in the case of adult dependents is a very demanding one, which will be met only exceptionally, but remains one of practical compulsion such that the EU citizen is left with no practical choice but to leave the territory of the Union.
The court rejected an argument by the Secretary of State that the Upper Tribunal had applied a lower test and avoided answering why the appellant would be compelled to leave the EU. The mother had said in evidence said that she would return with her daughter to Malaysia if necessary, but the court said:
these passages were simply the way in which DK chose to express her emotional attachment to her daughter. It is quite plain that this attachment was just one aspect of her exceptional dependency, both physical and emotional, on MS.
A common tactic in these cases is for the Home Office to argue that social services could provide care. That argument, of course, ignores the strong cultural, religious and quality of care arguments which arise frequently.
Lord Justice Underhill ended with a very useful paragraph about the adequacy of social service care being a relevant but not decisive factor:
The availability of state-funded medical and social care will, in many cases, make it hard for those who provide care for their elderly relatives to bring themselves within the Regulation. The availability of state care is not, however, to be treated as a trump card in every case, irrespective of the nature and quality of the dependency on the carer which is relied on. Just as the availability of an EU citizen parent to be a carer of a minor child does not render unnecessary an enquiry into the nature of the dependency of the child on her non-EU parent (see Chavez-Vilchez), the availability of state care does not avoid the need to enquire into the actual dependency of the EU citizen on her adult carer. The availability of alternative care is a relevant, but not always decisive factor.
Probably the main takeaway if you are preparing applications like these is to put particular emphasis on the quality and nature of care which social services are likely to provide compared with your client.
It might also be useful to obtain an expert report about the limitations of the care which social service will provide. That is likely to be of particular importance in cases (like this one), where there are particular social, cultural and religious sensitivities.
Another excellent piece of evidence is a psychologist’s report detailing the bond between your client and the person receiving the care and the likely impact of separation on the two. All of this will allow for a much more holistic assessment rather than arguing theoretical issues of what care may be lacking or what the impact of separation would be.
Review of year 2018-2019
We have had three investor clients being successful for settlement and extension of their stay under Tier 1 (Investor) Route and 2 cases of entrepreneur migrants for extension of their stay in the UK
We successfully represented several cases last year 2018 and this year 2019 (Three cases so far) before the Immigration and Asylum Chamber (IAC) Birmingham and Newport. These cases are;
A) Entry Clearance for spouses of a person present and settled in the UK (Two cases won out of court settlement)
B) Marriage of convenience
E) Appendix FM and Appendix FM SE