No. 2006/00280/B1
2000/02734/W3
Neutral Citation Number: [2006] EWCA Crim 2698
IN THE COURT OF APPEAL
CRIMINAL  DIVISION
Royal Courts of Justice
The Strand
London
WC2A 2LL

Thursday 26 October 2006

B e f o r e:

LORD  JUSTICE  RICHARDS

MR  JUSTICE  GRIGSON

and

SIR  JOHN  BLOFELD

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R E G I N A

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SANDRA  MORPHY

GERALD  DAVIDSON  MORPHY
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MR A DONNE QC appeared on behalf of THE APPELLANT SANDRA MORPHY
THE APPLICANT GERALD MORPHY was not represented

MISS KATE MALLISON appeared on behalf of THE CROWN
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J U D G M E N T
Thursday  26  October  2006

LORD JUSTICE RICHARDS:  I will ask Mr Justice Grigson to give the judgment of the court.

MR JUSTICE GRIGSON: 
1.  On 19 October 1999, at the Crown Court at Aylesbury, Sandra and Gerald Morphy pleaded guilty to keeping a disorderly house between 1 January 1998 and 24 April 1999.  On 24 February 2000, both admitted a further offence in the same terms, the dates on this occasion being 1 October 1999 and 25 November 1999.  As regards Sandra Morphy, a charge of controlling prostitutes was left on the file; and in respect of Gerald a charge of living on the earnings of prostitutes was similarly dealt with.  Both were sentenced to eight months' imprisonment on each count to be served concurrently.  In Sandra Morphy's case the sentence was suspended for two years.  After a hearing the judge made a confiscation order against both in the sum of £142,186 under section 71 of the Criminal Justice Act 1988, with a sentence of three years' imprisonment in default.  He had calculated the benefit at £595,840, and the realisable property at £284,362, which he halved and so arrived at the figure of £142,176 for each.  Both applied for leave to appeal against sentence in respect of the confiscation order.  Leave was refused.  It appears that an application for leave to appeal against conviction was also refused.  Thereafter it seems that nothing happened, and eventually the Registrar stayed the application.  Sandra Morphy now appeals against sentence only, and specifically the confiscation order, upon reference by the Criminal Cases Review Commission.  Gerald Morphy's application for leave to appeal, which had been stayed, has been referred to this court by the Registrar for consideration following R v Gooch [1998] 2 Cr App R 130 and R v Charles and Tucker [2001] 2 Cr App R 15.  His position is in effect the same as Sandra Morphy's.

2.  The facts are straightforward.  In the period specified in the two charges, Mr and Mrs Morphy ran a brothel at Briars Bush House, Ivinghoe, Aston.  These activities attracted the attention of the News of the World, who sent in an undercover reporter and kept observations.  They reported their findings in the newspaper.  This prompted the police to raid Briars Bush House on 21 April 1999, which resulted in the first indictment.

3.  Having been bailed, the Morphys carried on their activities.  That again excited the attention of the News of the World, who kept further observations, made a further visit, and published a further article.  The police were prompted to strike again on 24 November 1999, which resulted in the second indictment.

4.  Although technically described as a "disorderly house", the evidence disclosed a discrete and well-run organisation in which the prostitutes were entirely volunteers.  The Morphys provided the facilities and the accessories for the prostitutes, who paid the Morphys £30 per day.  The evidence suggested that the girls charged between £40 and £100 for their services, money which ordinarily the clients paid directly to them.  If the client paid by cheque, the payee was left blank.  The girls were provided with lockers in which they kept their money.

5.  This appeal turns on a single and narrow point.  The confiscation proceedings were brought under section 71(4) of the Criminal Justice Act 1998, which provides:

		"For the purposes of this Part of the Act a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of the property so obtained."

The judge ruled that the Morphys had benefited by the whole of the sum paid to the prostitute.  He rejected the defence argument that the Morphys only benefited from the £30 rent that the girls paid to them per day.

6.  Having heard argument and having seen some evidence in the form of the prosecution written submissions, the judge made a series of findings.  His ruling concluded:

		"Therefore, in my view, the proper definition of 'obtaining' here, having considered various aspects of this case with some care now, and having gone through them with counsel, is that the Morphys did indeed obtain the sums which were paid to the prostitutes, but I do not accept the officer's calculation.  It has to be re-calculated.  He has calculated on £90 per girl, and the section 71 evidence does not support that."

7.  The Commission referred Mrs Morphy's case to the court because it was satisfied that there was a real possibility that this court would find that the judge misdirected himself in acceding to the prosecution argument that if he found that Mr and Mrs Morphy exercised control over the activities of the prostitutes, then he could go on to find that they had obtained all the monies paid to the prostitutes by their clients.

8.  Mr Anthony Donne QC adopts the views put forward by the Commission.  He asserts that the judge was wrong in law to find that the Morphys obtained the whole of the sum paid by the client to the prostitutes and that his finding that the Morphys controlled the prostitutes was flawed.  We do not need to determine that second issue.

9.  In the course of argument before the trial judge, prosecution counsel sought to rely on the decision at first instance of Auld J in R v Rees.  In that case the primary offence was obtaining under the Theft Act 1968.  We are satisfied that it is of no assistance here.  The approach to be adopted in relation to section 71(4) is that of Buxton J (as he then was) in R v Gokal, which he tried at first instance, where he said:

		"On the basis of that statement, therefore, the prosecution argues that Mr Gokal equally has obtained for the purposes of section 71 the whole sum of £548 million, which he caused to be obtained by the Gulf Group.  It is, however, important to note that the defendant in Rees was, as Auld J pointed out, charged under section 15 of the Theft Act and in that section the word 'obtains' has a particular meaning which is specifically there stated to be applied for the purposes of that section.  

		It may well be that where the question under section 71(4) of the 1988 Act is whether the defendant has obtained property as a result of or in connection with the commission of that offence under section 15 of the Theft Act, obtains in section 71(4) does indeed, as Auld J ruled, carry the meaning that he attributed to it, the meaning which he drew from the underlying offence of which the defendant in that case had been convicted.  

		I do not, however, find it easy to see that that reasoning follows where the offence that is the basis of the compensation claim is not a section 15 offence.  In those circumstances, as here, I do not see any obvious reason for reading the Theft Act definition as found in 15(2) of the Act into the Criminal Justice Act of 1988.  Indeed, the fact that that definition is said to be specific to that section would suggest that the ordinary meaning of the word 'obtains' is not set out in section 15(2) of the Theft Act.  I therefore hold that the phrase 'if he obtains' in section 71(4) of the 1988 Act requires what can fairly be described as an obtaining by the defendant."

That quotation is taken from the judgment of this court in R v Patel [2000] 2 Cr App R(S) 10.  In fact the confiscation order in Gokal was the subject of an appeal.  No criticism was made in the course of that appeal of Buxton J's approach either by the prosecution or the defence.  The court accepted (albeit implicitly) that it was right.

10.  Miss Mallison, who appears on behalf of the Crown, argues that the judge was entitled to find that the Morphys controlled the activities of the prostitutes.  She seeks to persuade us that the control exercised was sufficient to justify a finding that the Morphys had obtained the whole sum as the prostitutes were in effect acting as agents.  She has referred us to the judgment of Laws LJ in J v Crown Prosecution Service [2005] EWCA Civ 746.

11.  We do not say that such a conclusion is impossible.  We take the view that that was not the approach that the learned judge adopted.  Nor is the second limb of the argument supported by the evidence as put before the judge.  As it seems to us, there has been a confusion between "control" and "benefit".  It may be a proper inference that where there is a sufficient degree of control the brothel keeper obtains the whole fee and simply pays a proportion of it to the prostitute, but it is not a necessary inference.  In this case, while there might have been evidence upon which the judge could have made such a finding, he did not direct himself to that issue.

12.  It follows that, in our judgment, the way that he calculated the benefit obtained was flawed.  As we understand it, the figure which is effectively agreed, based on the sum of £30 per girl per day, is £48,060.  It follows that the finding in relation to the confiscation order against Sandra Morphy must be quashed.  

13.  The position of Gerald Morphy is exactly the same as Sandra Morphy.  Common sense would dictate that we grant him leave to appeal and treat this hearing as the appeal.  We make a similar finding in respect of him.

14.  The figure, therefore, which would appear to be the appropriate figure is half of that sum, which is £24,030.  To that extent the appeal is allowed in respect of both.

15.  The question then arises whether there are realisable assets.  That is a matter about which we wish to hear from counsel now.

LORD JUSTICE RICHARDS:  Is it a matter that strictly need concern us? The question of whether there are realisable assets is strictly one for a Certificate of Inadequacy going back to the Crown Court.  Is that right?

MR DONNE:  Yes.  I do not have any instructions on that.  If the appeal had failed, then Mrs Morphy could have applied for a Certificate of Inadequacy.

MR JUSTICE GRIGSON:  The Commission say that she has no assets at all, in which case, if that is accepted, it is simply a waste of money, is it not, for this court to make an order which is inevitably going to fail?

MR DONNE:  Those are my instructions.

MISS MALLISON:  My Lord, my instructions are that the assets have all gone.  One does not know how.  The term in default for the sum of £24,000 odd will be eighteen months, and if the defence are going to argue that they would like a Certificate of Dissipation of the assets, then the Crown would like an order of disclosure of their means because the Crown are concerned that this amount of money just seems to have slipped through their fingers.  
 
MR JUSTICE GRIGSON:  Sorry, you are talking about "they".  There are two appellants.  Gerald Morphy, as far as we know, is not here and is not represented.  
 
MR DONNE:  He is in Thailand and has been for some time.  
 
MR JUSTICE GRIGSON:  You cannot simply lump them together.  If you have read the Commission's report, which I am sure you have done, Mrs Morphy is reported as saying that he has gone and taken the assets with him.  
 
MISS MALLISON:  Those who sit behind me have not been able to find any assets either for him either, so to that extent -- forgive me for lumping them both together -- but the position is that we cannot find the money.  What I am going to ask the court to do is that if in fact the defence on behalf of Mrs Morphy are going to ask for some certification that the monies have been dissipated, we would like some directions given as to the disclosure of her finances and how the money has come to be dissipated because the properties were in joint names and I am not clear as to how, therefore, one person could have got hold of all of the money without any reference to the other person's interest.  
 
LORD JUSTICE RICHARDS:  Let us consider what our function here is.  We have considered an appeal against the confiscation order.  We have quashed the order, we have substituted in each case an order for just over £24,000.  It is right that we must as part of our order set a default term of imprisonment of eighteen months.  Is there anything more that strictly it is within our jurisdiction or our proper function to do?  
 
MISS MALLISON:  I do not think there is, my Lord.  
 
LORD JUSTICE RICHARDS:  If the appellants wish to contend that they do not have the assets to meet the order in the sum which is now specified by this court, there is a proper procedure in place for them to apply, not to us but to a lower court.  
 
MISS MALLISON:  My Lord, that is right.  
 
LORD JUSTICE RICHARDS:  It sounds to the court as though that is the right course to adopt.  
 
MISS MALLISON:  It rather took me by surprise that anyone would think otherwise.  I assume that this will be a preclude to Mrs Morphy making the appropriate application.  
 
LORD JUSTICE RICHARDS:  That will be for her to decide.  So there is nothing more that is required of us?  
 
MR DONNE:  No, thank you.  
 
LORD JUSTICE RICHARDS:  Can I thank you both for your assistance and in particular for the commendable brevity and succinctness of your submissions?  
 
MR DONNE:  My Lord, Mrs Morphy is not legally aided.  Can I ask for a defendant's costs order to be assessed?  
 
LORD JUSTICE RICHARDS:  Yes, we will grant such an order.  
 
MR DONNE:  Thank you.