Commissioner of Police v Ludlow
[2020] NZHC 3187
•3 December 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2018-419-155
[2020] NZHC 3187
IN THE MATTER of the Criminal Proceeds (Recovery) Act 2009 BETWEEN
THE COMMISSIONER OF POLICE
Applicant
AND
KEVIN JOHN LUDLOW
Respondent
AND
ETH TRUSTEES 2017 LIMITED
Interested Party
HPL WAIKATO/BAY OF PLENTY LIMITED
Interested Party…/cont
Hearing: On the papers Counsel:
R Guthrie for the Applicant
S McKenna for the Respondent
Judgment:
3 December 2020
JUDGMENT OF GORDON J
This judgment was delivered by me on 3 December 2020 at 3 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Crown Solicitor, Hamilton
McKenna King, Hamilton
COMMISSIONER OF POLICE v LUDLOW [2020] NZHC 3187 [3 December 2020]
KIWIBANK LIMITED
Interested Party
SCOTT DYLAN LUDLOW
Interested Party
KAYLA LUDLOW
Interested Party
Introduction
[1] In this proceeding the Commissioner of Police (Commissioner) seeks a profit forfeiture order under the Criminal Proceeds (Recovery) Act 2009 (the Act) against the respondent Keith Ludlow, in the sum of $721,173.75 being the alleged unlawful benefit.
[2] The parties now seek the Court’s approval under s 95 of the Act to a settlement of the litigation between them.
Property current restraint
The following property is presently the subject of a restraining order:
(a)The property at 10 Norman Street, Nawton, Hamilton being all that parcel of land containing 1012 square metres more or less being Lot 24 Deposited Plan S.3681 and being all that land comprised and described in Certificate of Title SA14C/173 South Auckland Land Registration District;
(b)$3,000 cash seized from 10 Norman Street in July 2017;
(c)The balance of funds held in the Official Assignee’s Trust Account, previously restrained from the following Kiwibank accounts with which Kevin John Ludlow shares a relationship:
[redacted] styled HPL Waikato/Bay of Plenty Limited;
[redacted] styled HPL Waikato/Bay of Plenty Limited;
[redacted] styled HPL Waikato/Bay of Plenty Limited;
(iv)[redacted] styled S (Scott) D Ludlow;
(v)[redacted] styled K (Kayla) Ludlow.
(d)The balance of funds held in the Official Assignee’s Trust Account being the proceeds of the early sale of restrained property pursuant to the further orders made by Davison J on 30 April 2019.
Background
Forfeiture application
[4] On 7 July 2017 during the search of a business premises in Hamilton tenanted by Mr Ludlow, shipping containers on the site were found to contain an elaborate commercial cannabis cultivation operation. A search of the office area recovered amphetamine and MDMA. A subsequent search of Mr Ludlow’s home address and vehicle resulted in the seizure of further controlled drugs as well as cannabis and MDMA together with $3,000 cash.
[5] Mr Ludlow was convicted of charges for cultivating cannabis, possession of amphetamine for supply, possession of cannabis for sale and three charges of possession of MDMA for supply. He was sentenced in the Hamilton District Court on 24 May 2018 to an effective term of two years and 11 month’s imprisonment.
[6] The financial investigation undertaken by the local Asset Recovery Unit established that significant sums of cash were paid into the accounts of the interested party HPL Waikato/Bay of Plenty Limited. These sums were not sourced from legitimate trading activities. False entries in business records were made to cover up funds sourced from drug dealing activities. The introduction of cash into the business and the falsification of business records constituted the significant criminal activities of fraud, tax evasion and money laundering on the part of Mr Ludlow.
[7] A review of Mr Ludlow’s income tax returns established that he had returned no personal income to Inland Revenue for the seven year period preceding 28 May 2018 (the date of the application for the restraining order and therefore the relevant period of criminal activity for the purposes of the Act) and in doing so committed the significant criminal activity of tax evasion.
Effective control application
[8] The property at 10 Norman Street referred to in [3](a) above is Mr Ludlow’s primary residence and is owned by the Kevin Ludlow Family Trust. Mr Ludlow is the settlor of that trust and is a trustee together with the interested party, ETH Trustees 2017 Ltd. Under the trust deed for the Kevin Ludlow Family Trust, Mr Ludlow, as settlor, has the sole power to appoint and remove trustees. He had the capacity to treat Norman Street as his own and did so.1
[9] Mr Ludlow is the sole director and shareholder of the interested party HPL Waikato/Bay of Plenty Ltd, a Hamilton based machinery dealer. The funds held by the Official Assignee referred to in [3](c)(i)-(iii) and (d) are all proceeds of bank accounts and/or sale of business assets of HPL Waikato/Bay of Plenty Ltd which were controlled by the respondent prior to restraint.2
Proposed settlement
[10]The parties advise that agreement has been reached as follows:
(a)Funds currently restrained in the accounts of interested parties, Scott Ludlow and Kayla Ludlow (Mr Ludlow’s two children) are to be released from restraint;
(b)All other restrained property is to be forfeited;
(c)Forfeiture of all restrained property will be in full and final settlement with no residual debt owing by Mr Ludlow in respect of the unlawful benefit of $721,173.75; and
(d)Each party will bear their own costs.
1 Pursuant to s 58 of the Criminal Proceeds (Recovery) Act 2009, the Court can treat effective control over property as an interest in property. The Court is thus enabled to look beyond a trust which disguises the true and effective control of property, and to consider the real position of a respondent in relation to the property. See Solicitor-General v Bartlett [2007] 1 NZLR 87 (HC).
2 Section 58 of the Act similarly applies.
Value of restrained property
[11] The total value of the restrained funds held by the Official Assignee at 24 September 2020 was $197,131.02. Included within that figure are the funds restrained from the accounts in the names of Scott Ludlow and Kayla Ludlow ($33,977.60 and $38,346.92 respectively). Once the funds in the bank accounts of Scott and Kayla Ludlow are released from restraint, the value of the restrained funds will be $124,806.50.
[12] The most recent registered valuation for 10 Norman Street is $535,000. The property is subject to a mortgage in favour of interested party Kiwibank Ltd. As at 17 November 2017, the settlement figure was $111,478.02.
[13]The estimated net return from sale of 10 Norman Street is approximately
$423,521.98 (allowing for a deduction for repayment of the mortgage and costs of sale and subject to the actual sale price).
[14] The estimated value of the property to be forfeited will be $548,328.48. The difference therefore between the unlawful benefit of $721,173.75 and the estimated value of the property to be forfeited in full and final settlement is $172,845.27.
Statutory provision
Section 95 of the Act provides:
95High Court must approve settlement between Commissioner and other party
(1)The Commissioner may enter into a settlement with any person as to the property or any sum of money to be forfeited to the Crown.
(2)A settlement does not bind the parties unless the High Court approves it.
(3)The High Court must approve the settlement if it is satisfied that it is consistent with—
(a)the purposes of this Act; and
(b)the overall interests of justice.
[15] First, as to the purposes of the Act: the primary purpose, in s 3(1) is to establish a regime for the forfeiture of property that has been derived directly or indirectly from significant criminal activity or that represents the value of a person’s unlawfully derived income. The ancillary purposes in s 3(2) include to eliminate the chance of persons to profit from undertaking or being associated with significant criminal activity and to deter significant criminal activity.
[16] The words “overall interests of justice” in s 95(3) require a broad inquiry.3 Relevant factors include the saving of time and cost and the litigation risk of a hearing to the Commissioner and a respondent.4 The Courts have recognised that a decision to settle proceedings under the Act will often reflect a “pragmatic” arrangement or solution, a “common sense compromise” or a “sensible resolution” that will meet the purposes of the Act and the overall interests of justice.5
[17] I am satisfied that the settlement proposed is consistent with the purposes of the Act and the overall interests of justice:
(a)There is likely to be a significant saving of time and cost if the proceeding between the Commissioner and Mr Ludlow can be resolved by consent without the need for a substantive hearing;
(b)The agreed settlement recognises the risks inherent in the litigation to both parties and allows them to control the outcome; and
(c)The estimated amount to be forfeited ($548,328.48) is a significant sum which is sufficient to act as a deterrent to Mr Ludlow and others.
Result
[18] Given I am so satisfied, under s 95 I must approve the settlement. I make an order that the following property vests in the Crown absolutely:
3 Commissioner of Police v Li [2018] NZHC 1566 at [32].
4 Commissioner of Police v Kree [2013] NZHC 2972 at [11]; Commissioner of Police v Zhang
[2016] NZHC 930 at [8].
5 Commissioner of Police v Douglas [2015] NZHC 1293 at [6].
(a)The property at 10 Norman Street, Nawton, Hamilton being all that parcel of land containing 1012 square metres more or less being Lot 24 Deposited Plan S.3681 and being all that land comprised and described in Certificate of Title SA14C/173 South Auckland Land Registration District, excluding the interest of Kiwibank Limited as mortgagee (including the proceeds of its sale);
(b)$3,000 cash seized from 10 Norman Street in July 2017;
(c)The balance of funds held in the Official Assignee's Trust Account, previously restrained from the following Kiwibank accounts with which Kevin John Ludlow shares a relationship:
(i)[redacted] styled HPL Waikato/Bay of Plenty Limited;
(ii)[redacted] styled HPL Waikato/Bay of Plenty Limited;
(iii)[redacted] styled HPL Waikato/Bay of Plenty Limited;
(d)The balance of funds held in the Official Assignee’s Trust Account being the proceeds of the early sale of restrained property pursuant to the further orders made by Davison J on 30 April 2019.
[19]For completeness I record:
(a)Funds currently restrained in the accounts of Scott Ludlow and Kayla Ludlow as referred to in [3](c)(iv) and (v) above are to be released from restraint;
(b)Each party will bear their own costs; and
(c)Once the orders are sealed the proceeding will be at an end.
[20] The fixture on Thursday 10 December 2020 is vacated and counsel’s appearances are excused on that day.
Gordon J
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