Serious Organised Crime Agency, R (On the Application Of) v Wang & Anor

MR JUSTICE SILBER:  

Introduction.

The Serious Organised Crime Agency (SOCA) make an application for a civil recovery order under Part V of the Proceeds of Crime Act 2002 in respect of properties and balances on bank and building society accounts held by and on behalf of the respondents Lu Wang (Mrs Wang) and Chuan Cheung Wu (Mr Wu).  

The case for the applicant, the Serious Organised Crime Agency, is that these respondents have been engaged in unlawful conduct and the properties represent properties obtained through unlawful conduct.  The unlawful conduct relates to the conduct of keeping brothels or permitting premises to be used for immoral purposes as well as money laundering.  

The whereabouts of the respondents is unknown.  They have not responded to the claim.  Orders have been made for substituted service which I will explain shortly.  The properties in respect of which the Civil Recovery Order is sought are (a)freehold property situate at 309 High Road, Willesden, London NW10 2JT; (b) the property situate at 61 Halstead Road, Enfield EN1 1QA; ©the property at 24a Wakelin Road, London E15; and (d) the property at 175 London Road North, Lowestoft, Suffolk NR32 1HG.  

The bank accounts which are said to be recoverable property relate to the balances standing to the credit of a number of bank accounts:  account number 8890381860/17/12 (sic) held at National Westminster Bank in the name of Mrs Lu Wang, Trading as A & M Health; account number 71584103, sort code 40/03/028, held at HSBC Bank plc in the name of Lu Wang; account number 91683020, sort code 40/20/23, held at HSBC Bank plc in the name of Lu Wang; account number 11291432, sort code 40/05/07, held at HSBC Bank plc in the name of Lu Wang; account number 81572814, sort code 40/14/28, held at HSBC Bank plc Chuan in the name of Lu Wang; account number 01019954, sort code 11/08/67, roll number E/31398898/7, held at Halifax plc in the name of Lu Wang; account number 1020184, sort code 11/08/67, roll number D/31404394/3, held at Halifax plc in the name of Lu Wang and Chuan C Wu; account number 83281507, sort code 20/59/42, held at Barclays Bank plc in the name of Wang Lu; account number 63230201, sort code 20/59/42, held at Barclays Bank plc in the name of Wang Lu; account number 90448184, sort code 20/44/61, held at Barclays Bank plc in the name of Wang Lu; and account number 40633003, sort code 20/45/42, held at Barclays Bank plc in the name of Wang Lu.  

The order that is being sought in respect of those properties is that civil recovery orders should be made in respect of them.  

The background to this case is that Mrs Wang and Mr Wu married in 1985.  They have a daughter, Miss Yi Wu.  Mrs Wang, who is also known as Wang Lu, who became a naturalised  British Subject on 12 May 2007.  On 5 October 2007 criminal investigations were launched into offences of money laundering and prostitution by the Suffolk Police.  On 5 February 2008 a restraint order was made by His Honour Judge McKittrick in Ipswich Crown Court against Mrs Wang.  This included the property at 175 London Road North and also certain bank accounts.  On 7 February 2008, Mr Wu was arrested at that property on suspicion that he was concerned in the management of a brothel and on suspicion of money laundering.  On 19 February 2008, Mr Wu flew to China on a return ticket but the return portion was never used and nobody has been able to find him.  

On 10 March 2008 the restraint order was varied so as to include properties at 61 Halstead Road, 24a Wakelin Road and 309 High Road, Willesden.  On 18 December 2009, Mr Justice Mitting made production orders against five financial institutions and two firms of solicitors.  A property freezing order was also granted by Mr Justice Mitting on the same day to take effect when the restraint order was discharged, and that took place on 8 January 2010.  

There have been problems in respect of service because the respondents could not be found.  Alternative service orders were made by Mr Justice Collins on 14 May 2010.  On 26 June 2010, Mr Justice Mitting continued the property freezing order subject to variation and addition of three further accounts.  He also made orders for alternative service so that service of the property freezing order and supportive witness statements could be made by first-class post to 175 London Road North, Lowestoft, and 61 Halstead Road.  It would be deemed served two days after post.  And there would also be e.mail service [which] was permitted to certain specified addresses with service being deemed the next day.  

On 1 December 2010, Mr Justice Lloyd Jones gave permission to serve various documents on the first respondent Lu Wang by first-class post to 175 London Road North, or by first-class post to 61 Halstead Road or by e.mail to specified addresses.  The deemed service took place on 29 December 2010.  On 30 June 2011, Deputy Master Knapman made a number of orders, including permission to serve any further documents in the proceedings on the first and second defendants by posting them to 175 London Road North and 61 Halstead Road.  

The position relating to today's application was that the notice was served pursuant to the order of Deputy Master Knapman by letters dated 5 August 2010.  Therefore there would be deemed service two days later.  In addition, the claimant wrote to the respondent's daughter, Miss Yi Wu, at 61 Halstead Road, informing her of the civil proceedings date and requesting that she should notify her parents of the hearing date.  During the course of the hearing, Miss Catherine Gibaud, who appears on behalf of the claimant, gave an undertaking that Miss Carrick would serve a witness statement within seven days stating that no response had been received to any of the documents which had been served on the respondents, and in particular those relating to today's hearing.  

I am therefore satisfied that adequate service has taken place.  The last known address in the United Kingdom for Mr Wu was 175 London Road North, Lowestoft, which is where he was arrested.  

The Legal Framework

Section 240 (1) of the Proceeds of Crime Act 2002 states:

The other relevant provisions are, first, Section 241 (1) which provides:

Section 241 (3) (a) sets out the way in which the court should deal with these matters:

The relevant provisions as to the approach to be adopted are set out in Section 242 which provides:

These provisions have been considered i a number of cases.  In R (Director of Assets Recovery Agency and Others) v Jeffrey David Green and Others [2005] EWHC 3168, Mr Justice Sullivan (as he was) explained the effects of Sections 241 and 242 in paragraph 47:

The matter was then clarified by the Court of Appeal in Director of Assets Recovery Agency v Szepietowski [2007] EWCA Civ 766, in which Lord Justice Moore Bick explained at paragraph 7:

I therefore agree with the summary set out by Miss Gibaud in a very helpful skeleton argument in which she says that in order to obtain a recovery order the Serious Organised Crime Agency must first set out the matters alleged to constitute a criminal offence of an identifiable kind or a number of offences of an identifiable kind.; and, second, prove on the balance of probabilities, the property was obtained by the defendant at the particular time or one of the number of times through unlawful conduct.  

The courts have adopted a fairly liberal approach in determining how these matters should be proved.  In Serious Organised Crime Agency v Gale [2009] EWHC 1015 (QB), Mr Justice Griffith Williams said at paragraph 14:

This reflects the views that have been earlier expressed by Mr Justice King in Director of the Assets Recovery Agency v Jackson [2007] EWHC 2553 (QB), where he said at paragraph 115:

In my view, this approach is clearly correct because it must not be forgotten that these applications are usually made against fraudsters who will go to enormous lengths to intermingle moneys from different wrongful activities which would make a tracing exercise extremely cumbersome and, in my view, unnecessary.  It is also worthwhile pointing out that in Section 266 (1) of the 2002 Act it explains to the court that if, in proceedings for civil recovery, "the court is satisfied that any property is recoverable, the court must make a recovery order."

"Recoverable property" is defined in Section 304 which states:

The nature of the recoverable property can be traced as set out in Section 305 (1) and (2):

The recovery of profits is permitted by Section 307 (1) and (2) which provide:

Turning to the nature of the case of the Serious Organised Crime Agency, it is, first, that the four properties which are referred to in the order were used as brothels; second, the respondents were involved in a number of ways as part of their brothel keeping.  There are a number of offences set out in the Sexual Offences Act relating to keeping, managing or assisting in the management of brothels or permitting premises to be used as brothels as well as controlling the activities of another person relating to prostitution and doing that with the expectation of gain for themselves or a third party.  The other way in which the case is put is that there has been money laundering, contrary to Part VII of the 2002 Act.  

The thrust of the case for the Serious Organised Crime Agency is the properties to which I have referred were obtained through unlawful conduct, and the banks have been credited with sums which relate to those activities.  It is said that the income of the respondents which has been declared during the period cannot explain those deposits in the account and the property purchases.  

Turning to the unlawful conduct, the first property to which it relates is 175 London Road North.  There is evidence in the witness statements of Miss Carrick which shows that advertisements were placed in the Waveney Advertiser and other local papers in respect of these premises.  One was stated to be for "oriental massage".  Others were for "oriental massage by pretty girls" and "in and out call services".  A telephone number was used for the advertisements.  Test purchases were carried out by authorised police officers.  Prices were quoted for services.  In one call the caller was assured that he would get "a pretty girl" and another was told the girl would offer full sex.  There were further calls which have provoked similar responses.  

In February 2011, a search warrant was carried out.  Mr Wu was found on the premises.  He was arrested.  There were people who called the number and have said that they were provided with sexual services at their home.  It is said that both of the respondents have been involved in these premises which have been described correctly as being brothel keeping activities.  

Moving to 46 Brook Street in Colchester, on 1 November 2007 a visit was made by an officer of Essex Police and Mr Wu was found on the premises.  There were two Chinese women, and a man was receiving massage services.  One of the women said that she had responded to an advertisement in a Chinese newspaper asking for women to sell sex.  There was also evidence of newspaper advertisements being placed for these premises, and there was other evidence before me which shows that these were being used as a brothel and that the respondents had been involved in connection with them.  

Moving to 309 High Road and 16 Western Court, an advertisement appeared in the newspaper Loot in respect of "special body to body" and "oriental massage and escort services".  When officers of the Metropolitan Police called the number they were directed to 309a High Road which is part of 309 High Road.  They were informed that a Chinese girl was working, and it could be inferred that sexual services were being offered.  

There were also complaints received in respect of 16 Western Court from the daughter of an elderly neighbour who complained about frequent male visitors to the flat which coincided with sounds of sexual activity.  The complainant located an advertisement and called the number, and a male colleague was offered sexual services with the address being given as 16 Western Road.  Also documents had been obtained which showed that these premises were being used as brothels and that Mrs Wang owned 309 High Road and rented 16 Western Road out.  Thus it is said that they were involved in the running of brothels in each venue.

As to the money laundering, the case for the Serious Organised Crime Agency is that the income from brothel businesses was paid into accounts and they were used to purchase property, resulting in the conversion and transfer of property.  There is also evidence that the respondents' legitimate income cannot account for the moneys paid into their accounts.  It is pointed out that between 1998 and 2008 Mrs Wang disclosed a net income of £26,502.79, and between 2003 and 2005 she declared income in respect of a business at Unit 26, Market Hall, Wood Green Shopping Centre.  

In the 10-year period between 1998 and 2008, Mr Wu declared a net income of £21,885.30 but neither of them made income declarations between 2005 and 2008.  

I accept the case that the income that the claimants had received, which is set out in Miss Carrick's affidavit, cannot explain the deposits held by the respondents in the accounts which are subject of this application and the property purchases made in the same period.  

As to the recoverable property, the recovery orders are sought in respect of the 12 bank accounts to which I have referred.  Of these, 10 are held in the name of Mrs Wang, one by Mrs Wang and Mr Wu and one by Shuqin Wu who is the daughter of Mr Wang.

MISS GIBAUD:  That is the sister.  That has been dealt with in fact by paragraph 3 of the draft order.

MR JUSTICE SILBER:  It is noteworthy that £496,666 is credited to the accounts during the period between 5 November 1998 and 27 December 2009 and over £301,000 has been identified as cash credits.  The case is that these funds were obtained through unlawful activity.  

As I have explained, I am entitled, if not obliged, to have regard to the totality of the evidence.  In the light of the facts which have been set out in Mrs Carrick's witness statement, and to which I have referred, I am satisfied that the funds were obtained through unlawful activities.  I have also explained the lack of declared income which fortifies the conclusions to which I have referred.  

There is substantial evidence relating to each of these bank accounts.  In respect of each of them the inference can and, in my view, should be drawn that the funds were obtained through unlawful conduct.  It is noteworthy that in respect of the Lloyds TSB account, this was held in the name of Miss Shuqin Wang who is a sister.  She has been served with copies of these applications and has taken no part in the proceedings.  

I am satisfied that the properties have been obtained through unlawful conduct and that it is unnecessary to do a tracing exercise.  Similarly, I am quite satisfied that all the properties, the money standing in the accounts, were obtained through unlawful conduct.  If I had been in any doubt about this - which I am not - I would have reached the same conclusion by reason of the fact that the respondents and the sister had been served with all the documentation in this case, and they have not either put in evidence or sought to challenge any of it.  

I therefore would make the order which has been sought subject to two changes which I discussed with Miss Gibaud.  One relates to the undertaking given by Mrs Carrick to serve a witness statement saying no response has been received to any of the documents or any of the applications.  That witness statement will be served within seven days, in other words, by 10 am on 26 October.  Also liberty to apply - which will be given to all parties - is that there will be liberty to apply during the period of three months and also a liberty to apply to extend that period.

MISS GIBAUD:  Three months from the date of this order.

MR JUSTICE SILBER:  Yes.  Three months from the date of service of the order.  The final point that has to be made is that what is said in paragraph 6 of Deputy Master Knapman's order on service will apply to this order.  

Could you draft this and send it through to me?

MISS GIBAUD:  I will.  I clarify one matter raised in my Lord's judgment.  At paragraph 49 of my skeleton argument I set out that it is the Serious Organised Crime Agency's case that the following four properties were being used as brothels.  My Lord, quite correctly, went through all the evidence on that.  I just wanted to make it clear that the properties at 46 Brook Street and 16 Western Court are properties that the evidence shows were rented by the respondents for the purposes of brothel keeping.  Those two particular properties are not the subject of this order.  The other two properties that are the subject of this order are specified, are 61 Halstead Road and 24a Wakelin Road and the evidence shows that they were obtained by the proceeds of this unlawful conduct.

MR JUSTICE SILBER:  I am sure that this will come out in the transcript.  I thank you for the excellent skeleton argument which has made my task easier.  Thank you very much, it has been very helpful.

MISS GIBAUD:  I am instructed to make one more correction.  Miss Shuqin Wang, the sister of the first respondent, was in fact notified of the proceedings but not  served with notice of the proceedings.