Barnett, R v

This is the judgment of the court.

This matter came before the court by way of a renewed application for permission to appeal against sentence in the form of a confiscation order made by His Honour Judge Hernandez at Manchester Crown Court on 11 February 2011. The application had first been listed before a different division of the Full Court (Richards LJ, Calvert-Smith and Underhill JJ) on 29 September when leave was given to amend the original grounds of appeal (prepared by the Applicant in person) by their deletion and the substitution of new grounds prepared by Mr David Friesner. The hearing was adjourned with a direction that the Crown should attend at the adjourned hearing.

We will set out the detailed background shortly, but it emerged that it was not so much the actual confiscation order made (in the sum of £4000 payable within 12 months with 3 months imprisonment in default) that was the subject of the challenge in the proposed appeal, but the assessment by the judge of the extended benefit derived by the Applicant from his general criminal conduct in a sum of just in excess of £5 million. We raised the question of whether the proposed appeal was academic and, for that reason, did not merit the attention of the court. Whilst both Counsel thought it unlikely that the issue would have relevance at any future stage, they could not exclude the possibility that it may become relevant in future proceedings. Accordingly, we have been prepared to consider the arguments advanced. It is possible that our conclusion may have wider implications than merely in the circumstances of this case.

The point is a short one and depends upon the true effect of section 8(8) of the Proceeds of Crime Act 2002. It may have a bearing on the practice to be followed when a court carries out an assessment of benefit under section 8.

In view of the arguments we heard, we have given permission to appeal and will hereafter refer to the Applicant as ‘the Appellant’.

We will identify the short point in issue when we have set out the background in greater detail.

On 17 March 2004 the police searched a number of brothels run by the Appellant in the Manchester area. A total of £21,017.34 in cash was seized from those brothels. He was arrested for offences concerning the running of brothels and on 19 August 2004 was charged with various offences connected with that activity.

He eventually appeared before Manchester Crown Court on 10 October 2005 in relation to these matters. As will emerge, there is no doubt that there had been detailed discussions between the representatives of the prosecution and the defence in the period leading up to that hearing.

The indictment the Appellant eventually faced on that day (leave being granted during the hearing by His Honour Judge Hernandez to sign the same out of time) contained three counts of living on prostitution contrary to section 30(1) of the Sexual Offences Act 1956. Each offence related to a specific brothel that he had operated at three separate addresses in Manchester and the particulars specified that the offences were committed between 1 March 2001 and 17 March 2004. This indictment was in substitution for an indictment containing other counts.

Following a considered and detailed Goodyear indication from the judge the Appellant pleaded guilty to Counts 2 and 3, Count 1 being left on the file on the usual terms.

The Goodyear indication followed submissions on behalf of the Appellant, the substance of which were not challenged by the prosecution, and its essence was in these terms:

“So in summary, the nature of the offences if this defendantwere to enter a [guilty] plea would cross the custody threshold. Theauthorities suggest a short term of imprisonment, but I would be minded to find and accept that exceptional circumstances could be argued which would justify theimposition of a suspended sentence of imprisonment but it maybe that additional financial penalties would be appropriate.”

In expressing that view the judge also said this:

“The Crown accepts that there has been a degree ofworking in partnership with this defendant and the prosecutionauthorities. Those matters have been ventilated in the variousskeleton arguments that were presented to me yesterday in support of an argument for and against abuse of process, andit is perhaps unnecessary for me to go into any further detailsat this point.”

We have not seen those skeleton arguments, but we have noted in the exchanges that operated as a prelude to the Goodyear indication reference to a “Home Office document”, as it was called, entitled ‘For Love or Money’. We understand this to have been a reference to ‘For Love or Money: Pimps and the management of sex work’, a paper produced in November 2000 for The Policing and Reducing Crime Unit (‘PRC Unit’), part of the Research, Development and Statistics Directorate of the Home Office. It was emphasised that the views expressed in the report were those of the authors and not necessarily those of the Home Office, nor that they reflected Government policy. However, it would seem that the police in Manchester adopted at least part of the philosophy of that paper which suggested a degree of co-operation between the police and someone such as the Appellant with a view to trying to ensure that prostitution took “the least unacceptable form”. It appears that the major concerns would have been the use of drugs in any of the establishments or the presence there of under-age girls. Trafficking was another feature of understandable concern to the police.

On that basis it would appear that the Appellant’s activities, whilst not condoned by the local police, did receive a measure of tacit approval over a period of time. It seems that the brothels of which he was the owner did not at that stage in the climate then prevailing step over the line regarded as unacceptable. The process of tacit acceptance of what took place was described in the proceedings before the judge as one of “tolerance and openness” with “unwritten rules” being applied and the turning of a “blind eye”. It was plainly that approach that itself led to the discussions that took place between the prosecution and defence in the period before the hearing in October 2005 and undoubtedly influenced the judge’s approach to sentencing on that occasion.

One feature of the interchanges prior to the giving of the Goodyear indication related to the level of any confiscation order that might be imposed. As we have indicated, a total of £21,017.34 in cash was recovered from the brothels searched by the police. It requires little imagination to appreciate that a sum of £21,000 odd would be extremely unlikely to represent the total benefit received from running the brothels for the period reflected in the indictment. No-one, of course, suggested it was: it was the amount of cash found.

What was said to the judge about this aspect of the matter by the Appellant’s Counsel (and, again, not controverted by the prosecution) was this:

“… the prosecution [is] clearly alive and concerned about the possibility of a disproportionate result resulting in the event that a full confiscation hearing were to be heard, they suggest that a figure of £21,107 is an appropriate basis.That, I submit, will in some way impactupon your Honour’s view of the case.”

After the judge gave the Goodyear indication Counsel then acting for the Appellant (Mr Mark Benson) returned to that matter, having taken instructions from the Appellant. The interchange was in the following terms:

JUDGE HERNANDEZ: Yes, Mr Benson?

MR BENSON: Your Honour, I am grateful for the time and for the fact that Your Honour has given a Goodyear indication. May I just clarify one point of detail? Your Honour referred to … an additional financial penalty. I think myself and my learned friend presumed that you were contemplating the figure that my learned friend said was the appropriate basis on which to proceed, the £21,000 figure.

JUDGE HERNANDEZ: No, what I was intending to mean, that maybe the matter subject to confiscation. There is a possibility of a fine being imposed and I will hear argument on that.

It is clear from this, and indeed from other parts of the transcript that we need not quote in full, that the prosecution was inviting the judge to make a confiscation order in the sum of £21,017.34. The defence were content with this. It is equally clear that no investigation in the manner that would ordinarily have been carried out to determine the amount of benefit received was carried out. Mr Friesner suggested that there was “a deal” between the prosecution and the defence and Mr Andrew Jebb, who appeared for the Crown before us, did not dissent from that description. We make no observation on whether this was or was not an appropriate course to adopt, but it is quite clear that that was the effect of what took place. That is further confirmed by what Counsel for the Crown at the time, Mr Holland, said on that occasion which was in these terms:

“Cash was also seized from the various premises in the hundreds, representing the preceding day’s takings, but the police also had a warrant to search Mr Barnett’s home address …, and when they searched his premises, they recovered still more documents, effectively records of accounts kept by him concerning those premises as well as a sizeable amount of cash. In total the amount of cash recovered was £21,017.34, and I might pause for a moment and tell Your Honour that so far as that figure is concerned, the Crown seek confiscation of it, please, under the terms of the Criminal Justice Act 1988. Documentation in connection with that has already been seized, and I offer that figure to Your Honour as being an agreed figure as between the parties in terms of benefit conferred by these offences, counts two and three, and being available for confiscation, that cash being in the possession of the police and accruing interest in an appropriate account.”

The judge sentenced the Appellant to consecutive sentences of 4 months imprisonment on each of the two counts to which he had pleaded guilty, making 8 months in all, the sentences being suspended for 2 years, and made him the subject of a confiscation order in the sum of £21,017.34. What he said in relation to the confiscation order was this:

“The prosecution have taken a realistic and pragmaticapproach to this matter and they have assessed your financialbenefit to be £21,017.34 representing monies found either on the premises or at your home, and the benefit has been agreed in that sum, and I have already made a confiscation order in that amount. I am told that there will be further investigations by the Inland Revenue and her Majesty’ s Customs.”

Leaving aside any argument as to the legal effect of that order, there can be no doubt that the Appellant would have been entitled to assume that any risk he faced in relation to confiscation arising from his activities to date had been resolved by that order. The only further threat facing him from the financial point of view might be the result of any HMRC investigation, but that was outside the control of the court.

The order drawn up states that it was made under the Proceeds of Crime Act 2002. That was incorrect. It should have been the Criminal Justice Act 1988, as amended by the Criminal Justice Act 1993 and the Proceeds of Crime Act 1995. Mr Holland had referred correctly to the 1988 Act. Mr Friesner takes no point on that since it is plain that the court and the Crown were intending to act under the 1988 Act. Should there have been an issue, he recognises that, applying Lazarus [2005] 1 Cr.App.R. 98 and section 11(3) of the Criminal Appeal Act 1968, this court could substitute an order under the appropriate Act.

Whilst the proceedings which ended on 10 October 2005 were continuing, and indeed after they were concluded, the Appellant continued operating brothels in the Manchester area.

Just over two months after the proceedings before Judge Hernandez, on 17 December 2005 the Appellant was arrested again for managing brothels which, as we have indicated, he had continued to do whilst on bail and before and after the resolution of the confiscation proceedings on 11 October 2005. He was charged with various offences on 6 June 2006, those being five charges of keeping brothels and one of controlling prostitutes for gain. While the Appellant was on bail for these new offences he continued running the brothels and this led to further charges against him during 2007. A decision was made to prosecute the Appellant and the others who were alleged to have been involved in a single trial dealing with all outstanding matters. (It should, perhaps, be noted that whatever tacit acceptance of the Appellant’s activities there had been prior to his arrest for the offences that led to his appearance before the Crown Court in October 2005, he had been warned on a number of occasions of the likelihood of prosecution if he continued to operate his enterprise and there was a warning at the time of the sentencing process on 10 October 2005: see [2009] EWCA Crim 2684, paragraph 7.)

On 12 February 2008 the Appellant pleaded guilty at Manchester Crown Court to four counts of keeping a brothel used for prostitution contrary to section 33A(1) of the Sexual Offences Act 1956. The period reflected in each of these counts was 1 May 2004 to 15 December 2005 and related to four separate premises. He also pleaded guilty to one count of controlling a prostitute for gain contrary to section 53(1) of the Sexual Offences Act 1956 between the 25 July 2004 and 15 December 2005. Finally, he pleaded guilty to three counts of conspiracy with another to commit an offence contrary to section 33A(1) of the Sexual Offences Act 1956 between the 16 December 2005 and the 12 January 2007.

He was sentenced by His Honour Judge Ensor to various terms of imprisonment totalling 3 years and the suspended sentence imposed by Judge Hernandez was activated in full making a total sentence of 3 years and 8 months. Judge Ensor referred to the very significant amounts of money made from his activities and said that “on any view this was trading in brothels on a breathtaking scale”. He described the Appellant as “an avaricious and callous individual” and the trade as a vile trade “undertaken by an evil and immoral man”.

The Appellant’s wife, Michelle Barnett, was prosecuted separately for money laundering offences and convicted on 10 counts in April 2008. She was sentenced to 6 months imprisonment suspended for 2 years and made the subject of a confiscation order of just in excess of £250,000. Permission to appeal against the confiscation order was refused by the single judge. She abandoned her renewed application on 28 September 2011.

Judge Ensor did not deal with the issue of confiscation at the time he passed the sentences to which we have referred. The confiscation proceedings were postponed and, as we have indicated, in fact did not take place until 2 February 2011. The delay arose from the attempts made by the Appellant to challenge his convictions notwithstanding his pleas of guilty. Indeed he sought also to appeal against the convictions for the offences dealt with by Judge Hernandez on 11 October 2005: see [2009] EWCA Crim 2684. His renewed application for permission to appeal against the sentences imposed by Judge Ensor was refused on 30 October 2008: [2008] EWCA Crim 2732.

At all events, that is the procedural history leading up to the confiscation hearing on 2 February 2011. The judge on that occasion was also Judge Hernandez, Judge Ensor having retired in the meantime. The Appellant represented himself at the hearing, the Crown on this occasion being represented by Miss Tina Landale. The judge’s conclusion on the issue of the benefit obtained by the Appellant can be seen from the following passage of his ruling:

“I turn now to consider his benefit pid:8251figure. There is a dispute as to how the benefit figure should be calculated. Ian Barnett, seeks to argue that the Court, in calculating the benefit figure, should apportion his share of the takings at 37 percent to represent the fact that sums were deducted pid:8301to cover the running costs of the premises and the earnings of the prostitutes. I am bound by the analysis of the definition of benefit handed down by the House of Lords in R v May.

The benefit figure is the total value of the property for advantage obtained, not the pid:8351defendant’s net profit after deduction of expenses paid to co-conspirators. I therefore accept the Crown’s submissions as to the basis of the calculations to ascertain the benefit figure. It should be based on the takings without any deductions to cover the costs of the prostitutes or other business expenses. I pid:8402therefore accept the figure as put forward by the Crown, namely £5,071,222.70. This is based on a calculation of the proceeds from the brothels over the six year period which was calculated in the sum pid:8451of £5,102,204, less the £21,017.34 confiscated in the first trial.”

It is not, of course, in issue that the Act that governed the judge’s decision on this occasion was the Proceeds of Crime Act 2002. It is also not in issue that the Appellant’s convictions on 12 February 2008 resulted in the conclusion that he had a “criminal lifestyle”: see sections 6(4) and 75. This led to the application of the four assumptions set out in section 10(2)-(5) of the Act in deciding whether he has benefited from his general criminal conduct and deciding his benefit from the conduct. They are well-known, but we set them out for convenience:

(2)

The first assumption is that any property transferred to the defendant at any time after the relevant day was obtained by him -

(a)

as a result of his general criminal conduct, and

(b)

at the earliest time he appears to have held it.

(3)

The second assumption is that any property held by the defendant at any time after the date of conviction was obtained by him—

(a)

as a result of his general criminal conduct, and

(b)

at the earliest time he appears to have held it.

(4)

The third assumption is that any expenditure incurred by the defendant at any time after the relevant day was met from property obtained by him as a result of his general criminal conduct.

(5)

The fourth assumption is that, for the purpose of valuing any property obtained (or assumed to have been obtained) by the defendant, he obtained it free of any other interests in it.

Section 10(6) provides that the court must not make a required assumption in relation to particular property or expenditure if it is shown to be incorrect or there would be a serious risk of injustice if the assumption were made.

There is no real challenge to the judge’s application of the assumptions to the facts. However, the principal argument to which we will refer below (see paragraphs 33-53 below) is that the assumptions were applied incorrectly to benefits obtained by the Appellant prior to 10 October 2005. There is a minor matter, conceded by the Crown on this appeal, that the judge was wrong to take 15 December 2005 (namely, the date of his arrest for these matters) as the date by reference to which the “relevant day” for the purposes of the assumptions should be calculated. Subject to the principal argument, he should have taken the date upon which the Appellant was charged (namely, 6 June 2006) as the date by reference to which the relevant day should have been calculated: see section 85(1)(b). If the full 6-year period provided for by section 8(3) is applicable in this case, it is now agreed that the relevant day should be 6 June 2000. It is agreed that using this date, rather than 15 December 1999 as the judge did, would make little difference to the overall calculation of benefit - it would still be very substantial and run into several million pounds.

However, as we have said, the principal argument advanced by Mr Friesner on the Appellant’s behalf is that the judge should not have taken into account any benefit derived from the Appellant’s illegal activities prior to 11 October 2005. It is this argument that lies at the heart of the appeal and which we characterise as “the principal argument”.

We should say at the outset that the judge did not have the benefit of the arguments that we have received and indeed the point taken specifically before us does not appear to have been taken before him. As we have indicated, the Appellant represented himself. His main argument was that the confiscation proceedings were an abuse of the process of the court. The judge rightly rejected that argument and there is now no appeal against his decision in that respect. The Appellant did, however, also argue that the prosecution was precluded from relying on the period embraced by the 2005 convictions for the purposes of calculating the benefit he received from his criminal lifestyle. The judge encapsulated the argument and gave his reasons for rejecting it in this passage in his ruling:

“[The defendant’s] submissions raise another issue, namely whether the Crown are precluded from basing their calculations of his benefit figure by taking into account the period pid:7951covered by his 2005 conviction. I have read the transcript of those proceedings in 2005. I am satisfied that the order made was or should have been made pursuant to the Criminal Justice Act 1988. The order was in relation pid:8001to the sum of £21,017.34, which presented cash seized upon his arrest it was described as particular criminal conduct in relation to the two brothels. It was not characterised as general criminal conduct. There was no proceeds of crime pid:8051investigation undertaken.

In those circumstances I find that there is nothing unfair in the Crown seeking to determine the relevant day as being the 15th December 1999, that is six years prior to the date of his arrest in respect of the second trial.

In pid:8102the circumstances I do not consider it is unfair for the Crown to pursue these proceedings. However, I accept the Crown’s concession that to avoid unfairness to the defendant, the sum of £21,017.34 should be deducted before the pid:8151defendant’s benefit figure from his general criminal conduct is determined pursuant to section 8 of the Act within these current proceedings.

I therefore find that there is no abuse of process of the Court for these proceedings to be pursued by the Crown, nor do the circumstances reveal pid:8201any circumstances in which there could be a serious risk of injustice if any of the assumptions were made. In calculating his benefit figure, I have therefore applied the assumptions set out in section 10 of the Act.”

As we have indicated, the reference to 15 December 1999 is accepted now to have been wrong. The judge was, of course, correct to note that the order should have been expressed to have been made pursuant to the Criminal Justice Act 1988. It is, however, accepted by the Crown that his reference to “particular criminal conduct” was misplaced because it is not an expression that appears in the Criminal Justice Act 1988 and was not introduced into the confiscation lexicon until the 2002 Act: see section 76(3). However, it was submitted by Mr Jebb, by reference to the passage in the proceedings before him in October 2005 quoted in paragraphs 18 and 19 above, that it is quite plain what he had in mind. We do not have to consider this argument because of the more fundamental argument based upon sections 8(8) and 10(9) of the Act to which our attention has been invited.

It does not appear that the judge’s attention was drawn specifically to section 10(9) of the Act. It is in these terms:

(9)

But if a confiscation order mentioned in section 8(3)(c) has been made against the defendant at any time during the period mentioned in subsection (8) -

(a)

the relevant day is the day when the defendant’s benefit was calculated for the purposes of the last such confiscation order ….

The period mentioned in subsection (8) is of the period of six years ending with the day when proceedings for the offence concerned were started against the defendant. As we have indicated in paragraph 31, in this case that means the period starting on 6 June 2000.

Since the confiscation order made on 11 October 2005 was made within that 6-year period, the question is whether it constitutes “a confiscation order mentioned in section 8(3)(c)”. If so, it would mean that 11 October 2005 should be taken as the "relevant day" provided it can be taken as “the day when the defendant’s benefit was calculated for the purposes of the last such confiscation order.”

So what is “a confiscation order mentioned in section 8(3)(c)”? It is necessary to look at subsections (3) and (4):

(3)

Subsection (4) applies if -

(a)

the conduct concerned is general criminal conduct,

(b)

a confiscation order mentioned in subsection (5) has at an earlier time been made against the defendant, and

(c)

his benefit for the purposes of that order was benefit from his general criminal conduct.

(4)

His benefit found at the time the last confiscation order mentioned in subsection (3)(c) was made against him must be taken for the purposes of this section to be his benefit from his general criminal conduct at that time.

It is accepted by the Crown that the Appellant’s convictions on the 11 October 2005 brought section 72AA of the Criminal Justice Act 1988 into play. This provision was introduced by section 2 of the Proceeds of Crime Act 1995 and provides for what are usually called ‘the Extended Benefit provisions’. Prior to the implementation of this section the court could make a confiscation order only in respect of the offence or offences of which the defendant was convicted in the same proceedings or which the defendant specifically requested the court to take into consideration in determining sentence: section 71(2), Criminal Justice Act 1988. The new section enabled assumptions to be made (that are effectively mirrored in section 10 of the 2002 Act) to the effect that any property held or transferred to the defendant in the 6-year period ending when the proceedings were instituted against him represented the proceeds of criminal conduct. It provides as follows:

“72AA Confiscation relating to a course of criminal conduct.

(1)

This section applies in a case where an offender is convicted, in any proceedings before the Crown Court or a magistrates’ court, of a qualifying offence which is an offence of a relevant description, if -

(a)

the prosecutor gives written notice for the purposes of subsection (1)(a) of section 71 above;

(b)

that notice contains a declaration that it is the prosecutor’s opinion that the case is one in which it is appropriate for the provisions of this section to be applied; and

(c)

the offender -

(i)

is convicted in those proceedings of at least two qualifying offences (including the offence in question); or

(ii)

has been convicted of a qualifying offence on at least one previous occasion during the relevant period.

(2)

In this section “qualifying offence”, in relation to proceedings before the Crown Court or a magistrates’ court, means any offence in relation to which all the following conditions are satisfied, that is to say -

(a)

it is an offence to which this Part of this Act applies;

(b)

it is an offence which was committed after the commencement of section 2 of the Proceeds of Crime Act 1995; and

(c)

that court is satisfied that it is an offence from which the defendant has benefited.

(3)

When proceeding under section 71 above in pursuance of the notice mentioned in subsection (1)(a) above, the court may, if it thinks fit, determine that (subjectto subsection (5) below) the assumptions specified in subsection (4) below are to be made for the purpose -

(a)

of determining whether the defendant has benefited from relevant criminal conduct; and

(b)

if he has, of assessing the value of the defendant’s benefit from such conduct.

(4)

Those assumptions are -

(a)

that any property appearing to the court -

(i)

to be held by the defendant at the date of conviction or at any time in the period between that date and the determination in question, or

(ii)

to have been transferred to him at any time since the beginning of the relevant period, was received by him, at the earliest time when he appears to the court to have held it, as a result of or in connection with the commission of offences to which this Part of this Act applies;

(b)

that any expenditure of his since the beginning of the relevant period was met out of payments received by him as a result of or in connection with the commission of offences to which this Part of this Act applies; and

(c)

that, for the purposes of valuing any benefit which he had or which he is assumed to have had at any time, he received the benefit free of any other interests in it.

(5)

Where the court has determined that the assumptions specified in subsection (4) above are to be made in any case it shall not in that case make any such assumption in relation to any particular property or expenditure if -

(a)

that assumption, so far as it relates to that property or expenditure, is shown to be incorrect in the defendant’s case;

(b)

that assumption, so far as it so relates, is shown to be correct in relation to an offence the defendant’s benefit from which has been the subject of a previous confiscation order; or

(c)

the court is satisfied that there would (for any other reason) be a serious risk of injustice in the defendant’s case if the assumption were to be made in relation to that property or expenditure.

(6)

Where the assumptions specified in subsection (4) above are made in any case, the offences from which, in accordance with those assumptions, the defendant is assumed to have benefited shall be treated as if they were comprised, for the purposes of this Part of this Act, in the conduct which is to be treated, in that case, as relevant criminal conduct in relation to the defendant.

(7)

In this section “the date of conviction” means -

(a)

in a case not falling within paragraph (b) below, the date on which the defendant is convicted of the offence in question, or

(b)

where he is convicted of that offence and one or more other offences in the proceedings in question and those convictions are not all on the same date, the date of the latest of those convictions; and “the relevant period” means the period of six years ending when the proceedings in question were instituted against the defendant.”

Section 72AA(1)(a) refers to a notice to be given by the prosecutor under section 71(1)(a). In its amended form that section of the Criminal Justice Act 1988 read as follows:

“(1)

Where an offender is convicted, in any proceedings before the Crown Court or a magistrates’ court, of an offence of a relevant description, it shall be the duty of the court:

(a)

if the prosecutor has given written notice to the court that he considers that it would be appropriate for the court to proceed under this section, or

(b)

if the court considers, even though it has not been given such notice, that it would be appropriate for it so to proceed,

to act as follows before sentencing or otherwise dealing with the offender in respect of that offence or any other relevant criminal conduct.”

The combined effect of these provisions might appear to predicate the need for a notice to the court under section 71(1)(a) of the Act to be served before the power to assess the Extended Benefit under section 72AA could be invoked. We will examine that proposition as a matter of principle below (see paragraphs 43-53 and 54-64 below).

The chronology of events in this case shows clearly that one of the officers involved in the inquiries into the offences dealt with in October 2005, DC Paul Harper from the Greater Manchester Police Financial Investigation Unit, had started investigating the Appellant’s finances and was aware for the need for the written notice under Section 71(1)(a) of the Criminal Justice Act 1988. Indeed he had sent an unsigned copy through to the CPS for use in the anticipated confiscation proceedings. However, the notice was never served.

Mr Jebb has sought to argue that this failure to serve the section 71(1)(a) notice on the court would mean that the court would not have been entitled to make any of the statutory assumptions for the purposes of assessing the Appellant’s benefit. Drawing on the evidence of what occurred during the proceedings on 10 October 2005 (see paragraphs 18 and 19 above), he submitted that Judge Hernandez did not in fact seek to apply the extended benefit provisions and simply made an order for the confiscation of the money seized on the Appellant’s arrest, money which, he argued, represented the value of Counts 2 and 3 on the indictment to which the Appellant had pleaded guilty.

For the reasons we have given earlier (see paragraphs 18 and 19), we agree that the judge did not seek to apply the provisions of Section 72AA as such. He acceded to what in effect was a joint request on behalf of the prosecution and the defence, following discussion between them, to make a confiscation order in the sum of £21,000 odd and to treat that sum also as the benefit the Appellant had received. We do not in any way suggest that the judge was wrong to accede to that request, nor do we say that the agreement between the prosecution and the defence was itself inappropriate. There may well have been good reasons for taking that course at the time even though it resulted in the Appellant’s benefit from many years of criminal activity being treated as artificially low and undoubtedly very significantly lower than was the reality.

The essential question is whether that agreement could effectively be re-opened in subsequent confiscation proceedings based upon an acceptance of the existence of a “criminal lifestyle”. Whilst there is something very unattractive in the proposition that an artificial level of benefit should be assumed which is minute compared to the reality, it is also unattractive that once an agreement has been reached and sanctioned by the court, it can be reopened.

Mr Friesner has drawn our attention to the policy of the 2002 Act as reflected in the Explanatory Notes to section 8 which were published with the Act. The relevant paragraph is as follows:

“This section describes how the court must work out whether the defendant has benefited from criminal conduct and what the value of that benefit is. Subsection 2 explains that the court must regard the defendant as having benefited by the value of any property obtained by him from criminal conduct up to the time the court makes its decision. Subsections (3) to (8) deal with the situation where the court is holding a confiscation proceeding in respect of the defendant’s general criminal conduct, and a previous confiscation order or orders has been made against the defendant in respect of such conduct. General criminal conduct means all the defendant’s criminal conduct at any time, so a court making a general criminal conduct confiscation order could confiscate the same benefit twice, unless the legislation prevented it. Section 8 prevents double counting of the same benefit by providing (broadly) that, once the court has calculated the defendant’s benefit from his or her general criminal conduct, it must deduct the amount ordered to be paid under the last general criminal conduct confiscation order previously made against the defendant. Sub-section (4) ensures that a calculation of benefit once made in relation to an offence will apply for the purposes of any subsequent calculation of benefit in respect of general criminal conduct. The provision is not required for particular criminal conduct because the same offences cannot be subject to a second conviction, or taken into consideration for sentencing purposes twice, and therefore there is no risk of confiscating the same benefit from particular criminal conduct twice.”

That policy, of course, is reflected in the proposition that “calculation of benefit once made in relation to an offence will apply for the purposes of any subsequent calculation of benefit in respect of general criminal conduct” (which is said to be the purpose of subsection (4)). It might arguably be said that an agreed figure which has not been “calculated” in the manner ordinarily required for the assessment, and which has been agreed at an artificially reduced figure for whatever reasons of expediency may have seemed right at the time, should not bind a court in carrying out a full assessment exercise on a subsequent occasion. However, we do not think that such an argument could be sustained in the light of the conclusions at which we have arrived in relation to the interpretation of the statutory provisions.

Our essential concern is not, of course, the policy behind the statutory provision as such, but the effect of the provision as it falls to be interpreted by the usual process of interpretation. Does the Act give effect to the policy?

Mr Friesner has argued that the policy is achieved by focusing on the expression “is required or entitled to make” in subsection (8) of section 8. This provides as follows:

The reference to general criminal conduct in the case of a confiscation order made under any of the provisions listed in subsection (7) is a reference to conduct in respect of which a court is required or entitled to make one or more assumptions for the purpose of assessing a person’s benefit from the conduct.

Subsection (5) requires the court assessing the benefit derived from general criminal conduct to deduct the aggregate of (a) the amount ordered to be paid under each confiscation order previously made against the defendant and (b) the amount ordered to be paid under each confiscation order previously made against him under any of the provisions listed in subsection (7). Subsection (7) lists “Part 6 of the Criminal Justice Act 1988” as one of the relevant provisions for this purpose.

It follows, it is argued, that where a court was on a particular occasion “required or entitled to make one or more assumptions for the purpose of assessing a person’s benefit from” general criminal conduct under the 1988 Act, then the assessment of benefit made on that occasion would apply for the purposes of any subsequent assessment of benefit in one or other of two circumstances: either (i) where the earlier assessment process was in fact undertaken (in other words in a situation where the court was required to carry it out) or (ii) where, although the court did not engage in the full process of assessment of benefit, but was entitled to do so notwithstanding not being “required” to do so, and a figure for the benefit was specified by the court as the result of an agreement between the prosecution and defence.

As we have indicated (see paragraph 43), Mr Jebb has argued that the lack of the service of a notice under section 71(1)(a) resulted in Judge Hernandez not being “entitled” on 10 October 2005 to make any assessment of benefit from general criminal conduct notwithstanding that an agreed figure was put forward. Mr Jebb recognised that the argument was not attractive since it required the reliance of the prosecution on its own failure to serve the notice at that time in order to permit the opening up of a more wide-ranging assessment on the occasion of the Appellant’s second appearance before Judge Hernandez in February this year than might otherwise have been the case. If, of course, that was the effect of the statutory provisions, we would be obliged to give effect to it.

However, we do not consider that Mr Jebb’s argument can be sustained for the reasons set out below.

In two cases in this court, presided over by the then Lord Chief Justice, Lord Woolf, it was established that defects in the notice given to the Crown Court by the prosecution did not disentitle the court from considering the question of confiscation and, of course, in that process considering the benefit received by the defendant from his or her general criminal conduct.

In Sekhon and Others [2003] 1 WLR 1655 the general issue was the extent to which procedural defects could, or should, operate to invalidate confiscation orders made under the then existing legislation.

This court introduced its judgment in this way:

"Regrettably a series of cases have come before the courts recently which reveal that the prosecuting authorities, including the advocates appearing for them, have been attaching far too little significance to ensuring that confiscation proceedings are effective. A series of cases have resulted in orders for the confiscation of substantial sums being set aside for the failure to adhere to procedural requirements that are often of a technical nature."

It drew attention to the terms of section 72 which, so far as material, was in these terms:

(1)

A court shall not make a confiscation order unless the prosecutor has given written notice to the court to the effect that it appears to him that, were the court to consider that it ought to make such an order, it would be able to make an order requiring the offender to pay at least the minimum amount.

(2)

If the prosecutor gives the court such a notice, the court shall determine whether it ought to make a confiscation order ….

In relation to this section, the court concluded as follows at paragraph 31:

"Notwithstanding the actual language of S.72(1) which read literally is mandatory in its terms, we would not regard it as likely that Parliament would, for example, be concerned to deprive the court of jurisdiction because of defects in the contents of the written notice which is required by S.72(1). The notice, which does not have to be given to the defendant, starts the procedure and avoids the court being involved in confiscation proceedings if the prosecutor thinks that the court would not be able to order the defendant to pay more than £10,000. Furthermore, once the 1995 Act was in force, this is the almost inevitable conclusion because not only was the court required to exercise its powers when a notice had been given it had power to exercise its powers of its own volition."

The court also drew attention (in paragraph 13) to the changes made to section 71 of the 1988 Act by the Proceeds of Crime Act 1995 (see paragraph 40 above). It summarised those changes in this way:

“Section 1 of the 1995 Act made a number of changes to section 71 of the 1988 Act and these changes may be summarised as follows: (i) a duty was placed upon the court to exercise its powers to embark upon confiscation proceedings in every case in which written notice had been given by the prosecutor; (ii) the court was given a power to institute confiscation proceedings of its own volition; (iii) the minimum figure of £10,000 was abolished.”

This decision was, therefore, clearly to the effect that defects in the notice could not deprive the court of its entitlement to consider exercising its confiscation powers if invited to do so.

The status of Sekhon was considered by a Court of Appeal consisting of 5 judges (Lord Woolf CJ, Kennedy LJ, Mitchell, Hallett and Pitchers JJ) in R v Simpson [2004] QB 118. The issue in the case was whether the fact that the notice that was served on the court by the prosecution was not in the form required by section 72 of the 1988 Act meant that the court had no jurisdiction to make a confiscation order: see paragraph 22. The appellant in that case contended that it did have that effect notwithstanding that the Crown had already informed the court prior to the service of the notice that the figure suggested as being the amount that the appellant benefited from the fraud far exceeded the statutory minimum amount of £10,000. In addition, the court observed, the issue as to jurisdiction was not raised by the appellant prior to the confiscation order being made.

We will not extend this judgment by referring fully to paragraphs 51-56 in Sekhon, but the court, having referred to them at paragraph 40 of the judgment in Simpson, said this at paragraph 41:

“We have no doubt we should apply these paragraphs of the judgment in Sekhon. They are fatal to the arguments of the appellant on the jurisdiction issue. Any defects in the notice did not deprive the trial judge of jurisdiction.”

In our judgment, the combined effect of these two cases is as Mr Friesner contends, namely, that a failure to serve a notice on the Crown Court within section 71(1)(a), or the service of a notice that is defective for some reason, does not deprive the court of the jurisdiction to consider a confiscation order. This means that, whilst the court may not be “required” to do so in such a situation, it is “entitled” to do so. If it is “entitled” to do so, it is plainly entitled to act on the basis of the assumptions set out in section 10 of the Act.

It follows that Judge Hernandez was entitled to consider the question of confiscation on 10 October 2005 and, accordingly, the assessment of benefit (albeit accepted as an agreed figure) at that time must be taken for the purposes of section 8 “to be his benefit from his general criminal conduct at that time”: subsection (4), referred to in paragraph 38 above.

The statutory material concerning confiscation is somewhat labyrinthine and the process of following the appropriate paths is difficult, particularly when considering conduct spanning the introduction and subsequent amendment of various of the statutory provisions.

However, in our judgment, the path does lead in this case to the conclusion that the “assessment” made on 10 October 2005 must be taken as fixed for the purposes of any subsequent assessment of benefit. It follows that the “relevant day” for the assessment carried out by Judge Hernandez in February 2011 could not be earlier than 10 October 2005 and indeed, by virtue of section 10(9)(a) is that date.

The parties have agreed that the relevant period for the assessment of benefit to the Appellant is from 10 October 2005 until 12 September 2006. That latter date has been substituted for 6 June 2006 (see paragraph 31) because Judge Hernandez would have been obliged by section 8(2) to take account of conduct up to the time of his decision in February 2011 and the brothels were operating until 12 September 2006 when they were made the subject of a restraint order. The measure of the benefit received by the Appellant for this period has been agreed at £873,010.

Accordingly, whilst we do not disturb the order for confiscation made by the judge (£4000), we set aside his assessment of benefit recorded in the order made by the Crown Court (incorrectly, we are told) in the sum of £5,085,222.70 (rather than £5,075,222.70 as it should have been) and substitute the figure of £873,010.

The appeal is allowed accordingly.