The Jewish brothel owner who was jailed for prostitution activities and ordered to forfeit £5 million in immoral earnings is suing the police and Crown Prosecution Service for damages.

Ian Barnett, who was given a three-year prison sentence in 2008 after admitting running brothels in Manchester, is involved in a number of legal appeals aimed at clearing his name.

He claims his convictions are invalid because the police allowed his brothels to operate in exchange for providing information and ensuring his businesses did not involve drugs or trafficking. The CPS is also answering a claim of pursuing his conviction "maliciously".

The court action could have ramifications for dozens of sex industry convictions nationwide because it calls into question how some police forces operated under Home Office guidance issued in 2000, which suggested greater leniency for brothel owners.

On Wednesday, Mr Barnett was due to appear in court for the first time since launching his civil action. But District Judge Sunil Iyer postponed the hearing, requesting further time to address court documents. Greater Manchester Police and the CPS have asked the judge at Manchester's Civil Justice Centre to refuse Mr Barnett permission to continue his civil case, partly because he has already been convicted by another court. The legal block, known as a "strike-out action", would stop the civil case reaching a full court hearing, in which details of how the police conducted its dealings with the sex industry could be revealed.

In December, Mr Barnett won a judgment in the Court of Appeal in London, which reduced his confiscation order by £4.2 million. The judges then said that Mr Barnett's prostitution businesses, "whilst not condoned by the local police, did receive a measure of tacit approval over a period of time" and have noted that the case could have further legal ramifications.

A CPS spokesperson said: "The Crown Prosecution Service has instructed lawyers to apply to have a court strike off Ian Barnett's claim that the CPS acted inappropriately and maliciously while prosecuting him, as we believe that his civil claim is in essence an attempt to undermine the guilty verdict reached by the Crown Court during his criminal trial."

Greater Manchester Police refused to comment on the case, saying it was "an ongoing matter".