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United Kingdom Employment Appeal Tribunal
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Cite as:  UKEAT 0219_10_1503
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EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
At the Tribunal
Judgment handed down on 15th March 2011
MR. J. D. EVANS
MR. M. WORTHINGTON
Transcript of Proceedings
Pothecary Witham Weld
70 St. George’s Square
JURISDICTIONAL POINTS – Worker, employee or neither
Claimant, a Methodist minister, brought proceedings for unfair dismissal – Tribunal held that it was bound by President of Methodist Church Conference v Parfitt  ICR 176 to find that she was not an employee
Held, allowing appeal, that the Tribunal was wrong simply to follow Parfitt in the light of Percy v Board of National Mission of the Church of Scotland  ICR 134 and that on the facts the Claimant was employed under a contract of service
THE HONOURABLE MR JUSTICE UNDERHILL
1. The Claimant was ordained a Methodist minister in 2003. In 2006 she was appointed, for a five-year term, as minister to a group of congregations in Cornwall. Over the course of the first half of 2009, following various problems of which we do not know the details, she felt that she was put under unfair pressure to resign; and in early June she was told that procedures were being commenced for her appointment to be “curtailed”. By letter from her solicitors dated 10 June 2009 she submitted her resignation from that appointment.
2. On 9 September 2009 the Claimant presented a claim for unfair dismissal against the President of the Methodist Conference, who is designated by statute as the appropriate person to defend claims against the Methodist Church. By a Judgment and Reasons sent to the parties on 4 February 2010 an Employment Tribunal sitting at Truro, chaired by Employment Judge Parker, dismissed her claim on the basis that she was not an employee of the Church within the meaning of section 230 of the Employment Rights Act 1996 – that is, that she had not worked under a contract of service - and was accordingly not entitled to bring a claim of unfair dismissal. The Tribunal held that it was bound to reach that conclusion by the decision of the Court of Appeal in President of the Methodist Church Conference v Parfitt  ICR 176.
3. This is an appeal against that decision. The primary question for us is whether the Tribunal was indeed bound by Parfitt; though if it was not we need to consider whether we are ourselves in a position to decide whether the Claimant was an employee and if so to determine that issue.
4. The Claimant has been represented before us by Mr. James Bax and the Church by Mr. Oliver Hyams, both of counsel: Mr. Bax appeared before the Tribunal but Mr. Hyams did not.
5. Before the Tribunal the parties submitted a clear and well-drafted Statement of Agreed Facts, although it goes into a good deal of detail on the facts of the substantive claim, which are immaterial for the purpose of this appeal. There were also witness statements from the Claimant and the Assistant Secretary of the Methodist Conference, the Revd. Graham Howcroft. These are not in fact referred to in the Reasons and we are not clear to what extent they were relied on; but the only factual matters in them which are relevant for present purposes are not of a contentious character.
6. The Methodist Church is constituted by a Deed of Union made in accordance with the provisions of the Methodist Church Act 1976. The governing body of the Church is the Methodist Conference. The Conference publishes annually a compendium known as the Constitutional Practice and Discipline of the Methodist Church (“the CPD”), which contains the Standing Orders of the Church together with a number of other constitutional materials. The relevant version of the CPD for present purposes is that issued in 2009.
7. The process of becoming a minister in the Methodist Church is known as being “received into full connexion”, though the term “ordained” is also used. Reception into full connexion is distinct from the acceptance of a particular post or appointment.
8. A minister in full connexion may be appointed to minister to the needs of a particular “Circuit” – that is, a local grouping of congregations. Each Circuit will have a Superintendent minister, though there may also be one or more other ministers. A minister appointed to a Circuit is described as “stationed” in that Circuit. The responsibilities of Superintendent and other Ministers appointed to a Circuit are set out in some detail in Section 52 of the Standing Orders. Circuits will form part of a larger “District”, and although we were not taken to the formal constitutional position it is clear that in a broad sense the District and its officers have some responsibility for the Circuits comprised in it.
9. The Church operates a process under which ministers seeking appointment and Circuits seeking a minister circulate “profiles”, which are considered by a “matching committee”. In the event of a potential match the candidate and representatives of the Circuit meet one another; and if all goes well the Circuit will issue an invitation to the minister which he or she will accept. However, the formal appointment is made by the Conference.
10. In accordance with that process the Claimant was with effect from 1 September 2006 appointed Superintendent Minister on the Redruth Circuit for a five-year term. She was given nothing in the nature of a written contract of employment or statutory statement of terms. We were not supplied with a copy of the Circuit’s invitation to the Claimant, though it appears from the Statement of Agreed Facts that a good deal of information about the post (including details of the accommodation to be provided) were contained in the Circuit’s stationing profile. However, the parties will have understood that the relationship between them would be governed by the CPD, and more particularly by Parts 7 and 8 of the Standing Orders, headed respectively Ministers and Deacons (1) – Status and Stationing and Ministers and Deacons (2) – Terms of Service. We need not set these out in detail. We can summarise the relevant provisions from the two Parts as follows.
11. We take Part 7 first. S.O. 700 reads:
“(1) Ministers are ordained to a life-long presbyteral ministry of word, sacrament and pastoral responsibility in the Church of God which they fulfil in various capacities and to a varying extent throughout their lives.
(2) By receiving persons into full connexion as Methodist ministers the Conference enters into a covenant relationship with them in which they are held accountable by the Church in respect of their ministry and Christian discipleship, and are accounted for by the Church in respect of their deployment and the support they require for their ministry.
(3) Ministers in the active work exercise their ministry, including pastoral responsibility, primarily in the setting in which they are stationed, whether full-time or part-time, and whether or not the appointment is directly within the control of the Church.”
What clause (2) means, as we understand it, is that once a minster is ordained the Church takes responsibility for his deployment to particular roles in the active ministry, including but not limited to being stationed in a Circuit, and undertakes to provide financial support as appropriate. S.O. 740 (1) (a) reads:
“Ministers admitted into full connexion or recognised and regarded as such enter into a covenant relationship with the Conference as laid down in Standing Order 700. In this relationship they accept a common discipline of stationing and collegially exercise pastoral responsibility for the Church on behalf of the Conference in the stations to which they are appointed, working in collaboration with others, in the courts of the church and individually, who bear proper responsibilities in those situations.”
S.O. 743 concerns “reflective learning and development”, which requires ministers to engage in a process of accompanied self-appraisal. S.O. 760 is concerned with resignation from full connexion. We need not set out its terms, but we should note, because particular importance was attached to this point by the Tribunal, that the procedure appears not to permit unilateral resignation: the question whether to permit resignation rests with the President of the Conference. S.O. 774 provides for ministers who wish, or are directed, to be “without appointment”. Clause (6) provides that such ministers “shall normally be at no cost to the Church”.
12. We turn to Part 8. Section 80 is headed Support and Maintenance. S.O. 801 is concerned with stipends. Clause 1 (a) reads as follows:
“Circuit ministers and deacons, other ministers and deacons in the active work and probationers and appointed to stations within the control of the Church shall, subject to clauses (6) and (7) below, receive stipends at not less than the appropriate rate on the scale of minimum stipends from time to time prescribed by the Conference, provided that a minister, deacon or probationer who is duly permitted to serve part-time shall receive an appropriate proportion of the full-time rate, the amount of such proportion being determined with reference to connexional guidelines by the Chair of the District in which he or she is stationed after consultation with the circuit stewards or other responsible officers of the Circuit or other responsible body respectively.”
(Clauses (6) and (7) refer to exceptions with which we need be concerned here.) That wording implies that ministers receive stipends only while occupying an appointment in the active work of the Church; and that is confirmed by S.O. 774 (6) (see above). Clause (4) provides for ministers to continue to receive their stipends while incapacitated by sickness, though giving credit for statutory sick pay. S.O. 801 provides for various ancillary matters including the responsibility for the Circuit to cover “essential expenses” and for stipends to be paid quarterly in advance. S.O. 803 requires the Circuit to provide the minister with a manse conforming to published accommodation guidelines. S.O. 805 provides for a variety of retirement benefits including membership of the Methodist Ministers’ Pension Scheme. S.O. 807 to S.O. 807D provide respectively for ante-natal care, maternity leave, paternity leave, adoption leave and parental leave. Section 8 says nothing about holidays, but Part 2 of Book VI of the CPD, which contains “guidance” on a number of discrete topics, includes a section 2 headed “Holidays”. This begins by recognising “the impossibility and the undesirability of too strict a rule on a minister’s … use of time”; but it goes on to say that “the application of the principles of any person’s need of rest, recreation, exercise, fellowship, and above all a full family life, would require” rest and holiday periods which it proceeds to identify with some specificity, including 35 days’ holiday each year, plus the equivalent of statutory public holidays. It appears that the Claimant’s most recent annual stipend, presumably in accordance with the scale prescribed by Conference, was £19,248 p.a.
13. Two other provisions of the Standing Orders require to be mentioned:
(1) S.O. 543 provides that an “initial invitation to a minister” (sc. to be stationed on a Circuit) shall be for a period of five years. By S.O. 545 the invitation can be renewed for a further specified period, not to exceed five years. S.O. 544 provides a process whereby a current invitation can be “curtailed”. There is reference elsewhere to invitations being renewed on an annual basis: we are not sure how that fits with the concept of a five-year appointment, but nothing turns on that for present purposes.
(2) Part 11 of the Standing Orders prescribes an elaborate disciplinary procedure for (among others) ministers covering a wide range of offences. The available sanctions when a charge is proved include decision that a minister shall “cease to be … in full connexion” or “be without appointment”. Complaints against ministers are handled in the first instance by a “local complaints officer”, who will be the Chair of the District of which the Circuit forms a part.
14. In addition to those formal provisions, the Conference publishes materials further amplifying and explaining aspects of Church practice or teaching. Extracts from several of these are quoted by Mr. Howcroft, but they mostly do not add substantially to what can be understood from the Standing Orders. They emphasise, as one would expect, the spiritual responsibilities of a minister and the spiritual characteristics that he or she is expected to display. We should however refer briefly to two such publications:
(1) Mr Howcroft refers to a Report on the Present and Future Remuneration of Ministers and Deacons which states that the purpose of the payment of remuneration is
· To free ministers or deacons from basic financial concerns so that they can concentrate on their vocation
· To maintain the freedom of the Connexion to station a minister or deacon
· To make appropriate provision for retirement
· To be compatible across the Connexion
· To be broadly comparable with other denominations
(2) The Statement of Agreed Facts refers to a report adopted by Conference entitled What is a Circuit Superintendent ? which draws together and amplifies the relevant provisions of the CPD. It explains what is involved in the leadership role taken by a Circuit Superintendent.
15. Ministers are treated as Schedule E employees for the purpose of income tax.
16. Drawing together those features, para. 26 (i)-(x) of the Statement of Agreed Facts reads as follows:
“26. The following aspects are noted about the relationship between the claimant, a Minister, and the respondent:
i) Circuit Stewards were required to inform the claimant of any concerns as to her performance and any such issues could be raised and discussed during Circuit meetings.
ii) The claimant was required to have at least 1 accompanied self-appraisal(s) per year.
iii) The claimant received payslips, in which the Respondent deducted tax and National Insurance and included an "employee reference number".
iv) The claimant received a stipend (salary), manse (to a minimum standard) and a pension with the Respondent.
v) The claimant received a P60 at the end of the tax year and was required to sign a confirmation of what benefits she had received for tax purposes.
vi) The claimant received holiday pay.
vii) The claimant received sick pay.
viii) The claimant was required to obtain and provide a sick note and, to claim statutory sick pay.
ix) Volume 2 of the respondent's constitution (2008 CPD) contains Terms of Service, which includes details in relation to the stipend, accommodation and furnishing, furniture, ante-natal care, maternity, paternity, adoption and parental leave (Book III Standing Orders, Part 8, page 609-623).
x) The claimant, like all Ministers and members of the Methodist Church, was subject to the possibility of disciplinary action.”
17. The applicant in Parfitt was a minister in full connexion in the Methodist Church who wished to bring proceedings for unfair dismissal. It is a curiosity of the case that he was at the time of his asserted dismissal stationed in Jersey. Dillon LJ in the Court of Appeal said, without explanation, that nothing turned on that fact (see p. 179B): the explanation may be that, according to Mr Howcroft’s witness statement (see para. 59 below), the applicant had been removed not merely from his current appointment but altogether from full connexion (which are not the circumstances of the present case).
18. A majority in the industrial tribunal held that Mr. Parfitt was employed by the Church under a contract of service; and that decision was upheld by a majority in this Tribunal. It is another curiosity of the case that the majority in both Tribunals consisted of the lay members. The dissenting member in this Tribunal was Waterhouse J. His reasoning was as follows:
“I consider that the starting point of any consideration of the relationship between the Methodist Church and its ministers must be an examination of the faith and doctrine to which they subscribe and which they seek to further. The concept of a minister as a person called by God, a servant of God and the pastor of His local church members seems to me to be central to the relationship. In my judgment the reasoning of the Court of Appeal in Rogers v Booth  2 All ER 751 and of Joyce J. in Re Employment of Ministers of the United Methodist Church (1912) 107 LT 143 affords persuasive authority for rejecting the assertion that there was a contract between Mr. Parfitt and the Methodist Church, and I do not consider that the concept of a Methodist minister’s role or the interpretation of the words ‘a contract of service’ has changed significantly since the enactment of the National Insurance Act 1911. I am unable to accept that either party to the present proceedings intended to create a contractual relationship. Moreover, the elaborate code of practice and discipline of the Methodist Church, containing a wide spectrum of rules, recommendations and exhortations addressed to a variety of subsidiary organisations and persons, does not seem to me to be capable of formulation in terms of a contract between identifiable parties. The submission by the Methodist Church that a minister is, in effect, a person licensed by the Methodist Conference to perform the work of a minister in accordance with the doctrine of the Church and subject to its discipline is in my judgment, the most persuasive description of his status and role.”
19. The Court of Appeal allowed the Church’s appeal and held that the applicant was not an employee. Dillon LJ and May LJ both delivered substantive judgments; Sir John Donaldson MR agreed with both.
20. Taking Dillon LJ’s judgment first, the substantive part of his reasoning begins at p. 180H. He sets out certain passages from the Deed of Union expressing the doctrinal standards of the Church as regards the position of ministers. We need not reproduce these in full. Their flavour is sufficiently reflected by the following:
"Christ's ministers in the church are stewards in the household of God and shepherds of His flock. Some are called and ordained to this sole occupation and have a principal and directing part in these great duties but they hold no priesthood differing in kind from that which is common to all the Lord's people and they have no exclusive title to the preaching of the gospel or the care of souls. …
It is the universal conviction of the Methodist people that the office of the Christian ministry depends upon the call of God who bestows the gifts of the Spirit the grace and the fruit which indicate those whom He has chosen. …”
Dillon LJ then summarises certain provisions from the Standing Orders, which were at that time in broadly the same terms as they are now. They include the term as to resignation referred to above. He also quotes a substantial passage from a pamphlet entitled The Methodist Ministry, which insists that a minister’s stipend should not be regarded as payment for his services. Dillon LJ acknowledges that the Church is not a mere professional body dispensing qualifications, since ordination involves it in taking a role in the stationing of ministers and responsibility for their stipend. But he continues, at p. 182 G-H:
“Even so, however, in my judgment, the spiritual nature of the functions of the minister, the spiritual nature of the act of ordination by the imposition of hands and the doctrinal standards of the Methodist Church which are so fundamental to that church and to the position of every minister in it make it impossible to conclude that any contract, let alone a contract of service, came into being between the newly ordained minister and the Methodist Church when the minister was received into full connection. The nature of the stipend supports this view. In the spiritual sense, the minister sets out to serve God as his master; I do not think that it is right to say that in the legal sense he is at the point of ordination undertaking by contract to serve the church or the conference as his master throughout the years of his ministry.”
That passage of course addresses only whether a contract comes into existence on ordination, which it might be thought was not the main question; but, importantly, Dillon LJ continued by saying that the position is not altered where the minister is given a particular appointment, such as being stationed on a Circuit. He says (at p. 183 B-E):
“Despite the elaborate detail of the standing orders in relation to the manse and the furniture and fittings to be provided by the circuit for the newly appointed minister on the circuit, it seems to me that it follows, from a correct appreciation of the spiritual nature of the minister's position and relationship with the church, that the arrangements between the minister and the church in relation to his stationing throughout his ministry and the spiritual discipline which the church is entitled to exercise over the minister in relation to his career remain non-contractual.
It is not in dispute that there are persons such as secretaries or caretakers who are employed by the Methodist Church or by its local circuits under contracts of service. But because of his spiritual position and functions a minister is in a very different position from such persons.
I would agree with Mr. Parfitt's submissions to this extent that the spiritual nature of the work to be done by a person and the spiritual discipline to which that person is subject may not necessarily, in an appropriate context, exclude a contractual relationship under which work which is of a spiritual nature is to be done for others by a person who is subject to spiritual discipline. On any view the spiritual nature of the work and the spiritual discipline under which it is performed must be very relevant considerations when it has to be decided whether or not there is a contractual relationship.”
21. Those passages constitute Dillon LJ’s ratio. It is clear from them that his essential point was that there is no relevant contract of any kind between a Methodist minister and the Church, because there is no intention to create legal relations. (We say “relevant contract” because he did acknowledge, at p. 184 A-B, that there were probably binding contracts between the parties “in relation to some ancillary matters”.) That reasoning is applied not simply to whether ordination creates a contract but also to the case of a minister appointed to a specific post. Although there are some observations at p. 183 which appear to be directed at the distinct question of whether, if there were a contract, it would be a contract of service, these are parasitic on his main point. His reasoning is summarised by his concluding remark (subject only to a brief review of some older authorities) that “I agree with Waterhouse J for the reasons that he gave and which I have endeavoured to elaborate that there was no relevant contract between Mr. Parfitt and the Church and a fortiori no contract of service” (p. 184 E-F).
22. May LJ’s judgment is somewhat differently structured. At pp. 185-7 he held, like Dillon LJ, that there was no relevant contractual relationship between the applicant and the Church at all. He agreed with Waterhouse J that neither party intended to create a contractual relationship. However, he then proceeded separately to consider whether, if he were wrong about that, the contract in question was a contract of service. As to that he said, at p. 187 D-H:
“As Dillon L.J. has said, the courts have recognised that it is not practicable to lay down precise tests of what is required to constitute a contract of service. The tasks which people carry out and the contexts in which they do so daily become so much more numerous, more diverse and more sophisticated that no one test or set of tests is apt to separate contracts of service and contracts for services in all cases: indeed the further one finds oneself from the more usual type of master/servant relationship, as in the situation in this present case, the more difficult it becomes to apply the tests which the courts have hitherto suggested are of help. As MacKenna J. indicated in his well-known formulation of the appropriate tests in Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance  2 QB 497, 515, the question of control by the putative master of his servant's performance is an important consideration. However, like all decisions, that of MacKenna J. has to be considered in its context, just as the question in the instant case has to be considered in the context of a Christian church and one of its recognised ministers. Contrast the judgment of the Employment Appeal Tribunal in Winfield v. London Philharmonic Orchestra Ltd.  I.C.R. 726, where the context was also not the normal industrial or commercial one but "that of one of the world's finest orchestras composed of some of the world's finest musicians." In other words, "in deciding whether or not you are in the presence of a contract of service you look to the whole of the picture." Looking at the whole of the picture in the present appeal I am not satisfied that if there was a contractual relationship between Mr. Parfitt and the Methodist Church it was a contract of service: indeed I am quite satisfied that it was not. On this second point, therefore, I respectfully agree with the minority opinions of both the chairman of the industrial tribunal and the Employment Appeal Tribunal.”
THE LATER AUTHORITIES
23. In Davies v Presbyterian Church of Wales  AC 280 the question before the House of Lords was whether a pastor of the Presbyterian Church of Wales was employed under a contract of service so as to be able to bring a claim of unfair dismissal. The issue was thus essentially the same as in Parfitt. The conclusion was, as in Parfitt, that no contract of employment existed between the applicant and the Church. The only speech was delivered by Lord Templeman. It is decidedly succinct. He sets out the essential terms of the “Book of Order and Rules” which contained the Church’s constitution. He acknowledges, at p. 289C, “that it is possible for a man to be employed as a servant … to carry out duties which are exclusively spiritual”; but he holds that that had not been established in the instant case. He says, at p. 289 C-E:
“But in the present case the applicant cannot point to any contract between himself and the church. The book of rules does not contain terms of employment capable of being offered and accepted in the course of a religious ceremony. The duties owed by the pastor to the church are not contractual or enforceable. A pastor is called and accepts the call. He does not devote his working life but his whole life to the church and his religion. His duties are defined and his activities are dictated not by contract but by conscience. He is the servant of God. If his manner of serving God is not acceptable to the church, then his pastorate can be brought to an end by the church in accordance with the rules. The law will ensure that a pastor is not deprived of his salaried pastorate save in accordance with the provisions of the book of rules but an industrial tribunal cannot determine whether a reasonable church would sever the link between minister and congregation.”
And at p. 290 D-E he says:
“There was no contract of service between the applicant and the church, only obligations on the part of the church to administer church property in accordance with the trusts contained in the book of rules, and an obligation to ensure that no member of the church was unlawfully deprived of a benefit from church property to which that member was entitled under the rules. There is indeed an agreement between all members of the church to perform and observe the provisions of the book of rules, but that agreement will only be enforceable at law in respect of any property rights to which a member is entitled under the terms of the agreement. By no stretch of the imagination can such an agreement constitute a contract of service. Similar conclusions were reached … by the Court of Appeal in President of the Methodist Conference v Parfitt…”
24. While Lord Templeman did not express himself in quite the same terms as the Court of Appeal in Parfitt, his reasoning and conclusion are consistent with theirs; and the decision is clearly tacitly approved.
25. In Diocese of Southwark v Coker  ICR 140 the Court of Appeal had to decide whether an assistant curate in the Church of England was an employee for the purpose of the unfair dismissal legislation. Mummery LJ referred to the case law, including in particular Parfitt and Davies, and said, at p. 147B, that the essential ratio of the earlier authorities was that no contract of employment would typically arise between a minister of religion and his or her church because there was, typically, no intention to create contractual relations: it followed that the question whether any contract was one of service or for services was immaterial. He held that that ratio applied in the instant case. Staughton LJ said, at p. 150 F-G:
“I agree with the analysis of Mummery LJ and his conclusion that in general the duties of a minister of religion are inconsistent with an intention to create contractual relations. There may be some subsidiary contract as to a pension, or to the occupation of a house; but there is not a contract that he will serve a terrestrial employer in the performance of his duties. The absence of contractual intention is regarded by Chitty … as the basis of [Parfitt]. It seems to me to be the most appropriate explanation.”
Ward LJ agreed with both judgments.
26. In Percy v Board of National Mission of the Church of Scotland  ICR 134 a Minister of the Church of Scotland brought proceedings against the Board, which was the relevant organ of the Church, arising out of what was in effect her dismissal as an associate minister of a group of parishes. Her claim was brought under the Sex Discrimination Act 1975. In order to bring such a claim she had to be employee of the Church as defined by section 82 (1) of the Act, namely employed “under a contract of service … or a contract personally to execute any work or labour”.
27. The applicant’s claim was dismissed in the employment tribunal and in this Tribunal on grounds with which we need not be concerned; but the Court of Session dismissed her appeal on a different ground, namely that she was not employed by the Church within the meaning of section 82 (1). The Lord President reviewed the previous case-law, and in particular the judgment of Mummery LJ in Coker, and held, at para. 13 of his opinion, that its effect was that there was
“[a] presumption – rebuttable, of course – that, where the appointment was being made to a recognised form of ministry within the Church and where the duties of that ministry would be essentially spiritual, there would be no intention that the arrangements made with the minister would give rise to obligations enforceable in the civil law.”
28. The applicant’s appeal to the House of Lords succeeded. The majority held, as summarised in the head-note, that:
“Since the appointment offered to, and accepted by, the applicant entitled her, inter alia, to a salary, to reimbursement of her travelling expenses and to accommodation and other benefits in return for performing the duties of an associate minister, the agreement between the applicant and the Board of National Mission displayed an intention to create legal obligations between the parties enforceable in the event of a breach; and that the terms and conditions of the applicant’s appointment and the services she was required to provide in return for her salary and other benefits constituted a contract personally to execute work within the definition of “employment” in section 82 (1) of [the 1975 Act].”
We will set out the essential passages from the opinions of each of the members of the House. We should however make two points by way of preliminary:
(1) One of the issues before the House was whether the applicant, as a minister in the Church of Scotland, was an office-holder. No such issue arises before us.
(2) The point is made more than once that because the definition of “employee” in section 82 (1) of the 1975 is wider than that in the 1996 Act, extending protection to any person working under a contract personally to execute any work or labour, the House was not concerned, as were the courts in the earlier cases, with the question whether any contract was a contract of service. But for present purposes that is not – subject to one peripheral point (see para. 30 below) – a relevant distinction. As we have seen, the main basis of the earlier decisions was that there was no contract at all between the ministers and their respective churches because there was no intention to create legal relations; and that question did squarely arise for decision in Percy.
29. At paras. 7-11 of his opinion Lord Nicholls reviews the principal authorities about the employment status of ministers of religion, including Parfitt, Davies and Coker. At paras. 12 and 13 he observes that those cases contained several different strands. After considering the distinction between office-holders and employees, he deals at paras. 23-26 with the question of intention to create legal relations. He says this:
“23. A further strand in the authorities, most notably in the judgment of Mummery LJ in Diocese of Southwark v Coker  ICR 140, concerns the absence of an intention to create legal relations. There are indeed many arrangements or happenings in church matters where, viewed objectively on ordinary principles, the parties cannot be taken to have intended to enter into a legally-binding contract. The matters relied upon by Mr Parfitt in President of the Methodist Conference v Parfitt  ICR 176 are a good example of this. The nature of the lifelong relationship between the Methodist Church and a minister, the fact that he could not unilaterally resign from the ministry, the nature of his stipend, and so forth, all these matters made it impossible to suppose that any legally-binding contract came into being between a newly-ordained minister and the Methodist Church when he was received into full connection. Similarly with the Church's book of rules relied on by the Reverend Colin Davies in Davies v Presbyterian Church of Wales  ICR 280. Then the rebuttable presumption enunciated by the Lord President in the present case, following Mummery LJ's statements of principle in Diocese of Southwark v Coker  ICR 140, 147, may have a place. Without more, the nature of the mutual obligations, their breadth and looseness, and the circumstances in which they were undertaken, point away from a legally-binding relationship.
24. But this principle should not be carried too far. It cannot be carried into arrangements which on their face are to be expected to give rise to legally-binding obligations. The offer and acceptance of a church post for a specific period, with specific provision for the appointee's duties and remuneration and travelling expenses and holidays and accommodation, seems to me to fall firmly within this latter category.
25. Further, in this regard there seems to be no cogent reason today to draw a distinction between a post whose duties are primarily religious and a post within the church where this is not so. In President of the Methodist Conference v Parfitt  ICR 176, 183, Dillon LJ noted that a binding contract of service can be made between a minister and his church. This was echoed by Lord Templeman in your Lordships' House in Davies v Presbyterian Church of Wales  ICR 280, 289. Lord Templeman said it is possible for a man to be employed as a servant or as an independent contractor to carry out duties which are exclusively spiritual.
26. The context in which these issues normally arise today is statutory protection for employees. Given this context, in my view it is time to recognise that employment arrangements between a church and its ministers should not lightly be taken as intended to have no legal effect and, in consequence, its ministers denied this protection.”
He then proceeds to review the history of the applicant’s appointment to the post from which she had been dismissed, which he summarises as follows (at p. 144):
“30. The Parish Reappraisal Committee approved the appointment sought by the presbytery. The committee's published information sheet, inviting applications for this new post, referred succinctly to the duties of the associate minister. It stated also, by way of "terms and conditions", that the appointment would be for five years, the salary would be at the level of the minimum stipend, a manse would be provided and travelling expenses met. The associate minister would also serve as chaplain to HM Prison Noranside, but nothing turns on this additional responsibility.
31. Ms Percy responded to the advertisement. She was interviewed and her application was successful. The General Secretary of the Board of National Mission, the Reverend Douglas Nicol, invited her to accept the appointment. He sent her a copy of the terms and conditions. These were an amplified form of the terms and conditions already mentioned. They included a term that the associate minister, like any other minister, would be responsible to the presbytery in matters affecting life, doctrine and discipline. Ms Percy wrote to Mr Nicol formally accepting the offer. The presbytery ratified the appointment. In due course she was introduced as associate minister at a service at Kilry Church.
32. Subsequently, when the unhappy events leading to Ms Percy's demission occurred, she initially offered her resignation and then changed her mind and asked to withdraw her resignation. On 1 July 1997 Mr Nicol wrote in response, on behalf of the National Board of Mission, to "your request to withdraw your letter of resignation from employment by the Department of National Mission". He said that "we", meaning the Board, agreed "to reinstate your employment" from 17 June. He added that until further notice "you are suspended on full pay". Subsequently the suspension was confirmed by the presbytery.
33. These documents on their face seem to me to show that Ms Percy entered into a contract with the Board to provide services to the Church on the agreed terms and conditions. The House has been shown and told nothing to displace this prima facie impression. Whether the contract was a contract of service or only a contract for services is not material in this case.”
30. The structure of Lord Hope’s opinion, as regards this aspect, is more complex. At paras. 103-5 (pp. 160-1) he reviews the basis on which the Lord President believed that there was a presumption in such cases of an absence of intention to create legal relations. He refers to Parfitt, Davies and Coker, without suggesting that they were wrongly decided. But he makes the point at paras. 106-8 (pp. 161-2) that they were decided in an unfair dismissal context and that different considerations arise in a claim of sex discrimination. He notes that the effect of the supposed presumption is to create a requirement that, in order to invoke the right not to be discriminated against, a party to an employment arrangement should have made express provision that the arrangement was to have contractual effect, and he suggests that that is tantamount to allowing parties to contract out of a fundamental EU right. He then proceeds to consider separately what he describes as “the contract issue” and “the jurisdiction issue”. As regards the former he says at para. 112 (pp. 163-164):
“That there was an agreement [sc. between the applicant and the Church] there is no doubt. The respondents made an offer to the appellant of appointment as an associate minister on the terms and conditions which had been sent to her on 22 April 1994, and by her letter of 26 April 1994 she accepted it. There can be no doubt either that a patrimonial interest was involved in this case. The appointment was to a position which would entitle the appellant to a salary, to reimbursement of her travelling expenses and to a manse for her to occupy: see condition 3. She was to be entitled to the status of an associate minister, with a seat on the presbytery: see condition 4. Payments made to her for conducting worship outwith the charge and for her chaplaincy work were to be set against the cost to the respondents of funding the associateship: see conditions 8 and 9. ... Looking for the moment only at the agreement, it seems to me that it has all the ingredients that would be needed for it to be treated by the courts as intended to create legal obligations between the parties ... .”
He then turns to the jurisdiction issue and expresses the clear view (at para. 121) that there is no such presumption as the Lord President had applied. However, his reason for that view appears to be wholly or mainly that, as discussed previously, it would infringe the EU-derived right of an employee not to be discriminated against. To that extent Lord Hope’s reasoning has no application in a case, like the present, of unfair dismissal; but, as will appear, it is not shared by the other members of the House.
31. Lady Hale begins her opinion by stating that her reasons for allowing the appeal are essentially the same as those given by Lord Nicholls. As regards the existence of a contract, she says, at para. 148 (p. 175 D-F):
“… [The applicant’s] rights and duties were defined by the terms she had agreed with the Parish Reappraisal Committee of the Board of National Mission. As Lord Nicholls and Lord Hope have demonstrated, these bore all the hallmarks of a contract. For the reasons they have given, I too find it impossible to conclude that there was no intent to enter into legal relations. With the greatest respect to the Court of Appeal in Diocese of Southwark v Coker  ICR 140 and to the Lord President in this case, I have difficulty in understanding why there should be any presumption against such an intention. Staughton LJ accepted in Coker, at p 150, that there might be a "subsidiary contract, as to a pension, or the occupation of a house". Miss Percy would clearly have been able to bring legal proceedings had her salary not been duly paid or had she been wrongly deprived of the occupation of her manse. The consideration for these benefits must have been the performance of the duties she had undertaken. In this day and age, the notion that her "salary", modest though it was, was simply to meet her basic subsistence needs while she devoted herself to her religious and pastoral duties is unrealistic.”
At para. 151 (p. 176 D-H) she says:
“We were taken to three cases where clergymen had complained of unfair dismissal: President of the Methodist Conference v Parfitt  ICR 176, Davies v Presbyterian Church of Wales  ICR 280 and Diocese of Southwark v Coker  ICR 140. The definition of "employee" for the purposes of the law of unfair dismissal is different from, and narrower than, the definition of "employment" in the Sex Discrimination Act 1975. It is confined to "an individual who has entered into or works under … a contract of employment"; and a "contract of employment" means "a contract of service or apprenticeship": see Employment Rights Act 1996, section 230(1) and (2). That in itself is sufficient to distinguish those authorities. In any event, all of these cases depend upon their own particular facts. But in so far as those authorities may be explained by a presumed lack of intent to create legal relations between the clergy and their church, I cannot accept that there is any general presumption to that effect. The nature of many professionals' duties these days is such that they must serve higher principles and values than those determined by their employers. But usually there is no conflict between them, because their employers have engaged them in order that they should serve those very principles and values. I find it difficult to discern any difference in principle between the duties of the clergy appointed to minister to our spiritual needs, of the doctors appointed to minister to our bodily needs, and of the judges appointed to administer the law, in this respect.”
32. Lord Scott expressly agreed with Lord Nicholls, Lord Hope and Lady Hale. He made a few further observations but none which bear on the present issue.
33. Lord Hoffmann dissented, on the basis that the applicant was an office-holder and that that meant that her performance of her duties was not pursuant to any contract personally to execute work or labour. But parts of his opinion are relevant for our purposes. At paras. 61-62 (p. 150 C-F) he says:
“61. I think that difficulty has been caused by some of the reasons given in recent cases for saying that a priest or minister is not an employed person. To say, as Lord Templeman did in Davies v Presbyterian Church of Wales  ICR 280 that a priest is "the servant of God" is true for a believer but superfluous metaphor for a lawyer. As Laplace told Napoleon, there is no need for such a hypothesis. It would be no more (or less) illuminating to say that a constable was the servant of the law. The fact is that he holds an office, a well understood legal concept which creates rights and duties but does not involve a contract of employment.
62. Nor do I think it very helpful to say, as Mummery LJ said in Diocese of Southwark v Coker  ICR 140, that a priest is not employed because her appointment was not accompanied by an intention to create legal relations. That, together with the proposition that the priest is the servant of God, gives the impression that she operates entirely outside the legal system, looking to God to provide for her. It is not surprising that the appellant's counsel pointed to the prosaic documents issued by the Board of National Mission: the advertisement of the appointment, the written terms and conditions, the letter of offer and formal letter of acceptance. In the face of these documents, how can it be said that there was no intention to create legal relations? That submission seems to me unanswerable. There was plainly an intention to create legal relations. But those legal relations were not a contract of employment. They were an appointment to a well-recognised office, imposing legal duties and conferring legal rights. …”
And at para. 66 (p. 151 E-F):
“If the ministry had not been an office and the relationship between Miss Percy and the body who appointed her had been contractual, it would plainly have been a contract of service. It would have had all the characteristics of a contract of service.”
34. It is evident that Lord Nicholls and Lady Hale intended to correct what they saw as the trend of the earlier authorities, notwithstanding that those authorities were distinguishable in as much as they were concerned with claims of unfair dismissal: see especially paras. 23-26 in Lord Nicholls’ opinion and para. 151 in Lady Hale’s. And Lord Hoffmann was plainly of the view that some aspects at least of the reasoning in both Davies and Coker were simply wrong. But we defer at this stage consideration of the scope and effect of the impact of Percy on those earlier cases.
35. In New Testament Church of God v Stewart  ICR 282 the claimant was an ordained minister of the Respondent church, which was based in the United States but had a substantial organisation, with over 100 churches, in this country. He was pastor to a church in Harrow. Following the termination of his appointment for alleged misconduct, he brought a claim of unfair dismissal. The Church asserted that he was not an employee within the meaning of the 1996 Act. That argument was rejected by an employment tribunal chairman sitting alone and by this Tribunal. The Church appealed to the Court of Appeal. Its primary contention was that the tribunal was bound by Parfitt, which he contended had not been overruled by Percy. He also submitted that, since it was contrary to the tenets of the Church of God that its pastors should be regarded as employees of the Church, any finding to the contrary would be in breach of art. 9 of the European Convention of Human Rights.
36. The Court of Appeal dismissed the appeal. The judgments of Pill LJ and Arden LJ are important because they attempt to clarify how the law stands following Percy. But the facts of the case are also of interest when they are compared with those of Parfitt.
37. The judgment of Pill LJ starts by setting out the Tribunal’s essential findings of fact. For present purposes we need reproduce only paras. 6-9, which read as follows:
“6. The chairman stated, at para 4.4:
‘The claimant did [in 1999] cease working as a driving instructor and [began] to receive a salary paid through the payroll at Northampton. He also was entitled to join a pension scheme which had been arranged by the NTCG. There was therefore an agreement, which was not reduced in writing, between the claimant and those representing the respondent that he would perform certain work including administrative tasks and spiritual duties and that he would receive payment for it and be accountable, in part at least, to the national office. The respondent did not supply a contract of employment or anything analogous to it. Their position was and is that the ministers of religion who carry out work for the church, including those at the Northampton office (Bishops McLeod and Brown) are not employees.’
7. The chairman found that the respondent's ministers who were responsible for churches as pastors were required to fill in a monthly report form for the Northampton office describing the work they had done. Collections were taken at the local church and a proportion forwarded to Northampton and paid into a "ministers' stipend account". The chairman held, at para 4.6:
‘The money collected from the local churches, including that from Harrow amounting to the sum to cover their minister's salary and 'on costs', is paid into that account. The relevant minister is then paid from that account after tax and national insurance have been deducted. If the local branch does not send in sufficient funds, the respondent may give one month's grace but no more than that. In the case of the Harrow church there has always been sufficient funds to pay the claimant but there have been other churches where payment has been suspended or the minister has himself acknowledged that there is insufficient funding to cover his payment.’
8. The chairman found that the minister was expected to abide by the doctrine, policy and resolutions of the minutes, to which I will refer. The chairman held, at para 4.8:
‘The way in which the claimant carried out his work is that he was expected to address any spiritual needs of his local church and its members. Although there were no fixed hours, he was expected and carried out a number of services including two services on Sundays and a prayer meeting and a service on Mondays. He also ran matters such as choir practice and youth club, visited members in hospital or prison, provided pastoral care such as debt counselling and dealt with a number of administrative matters, in particular the completion of the forms referred to. With respect to the local church, he collected monthly mortgage payments and took it to the bank. He also officiated at weddings and other such functions.’
9. Having referred to the authorities, and to the submissions of the parties, the chairman concluded:
‘7.2. In my view there was an agreement between the claimant and the respondent that he should carry out work of a spiritual and administrative nature at the NTCG church in Harrow. Whilst he was free to arrange much of the work as he saw fit, he was also required to do so within the rules of the Church of God and in accordance with the procedures of the respondent through its national office. Bearing in mind that there had been a previous incident where the claimant was reprimanded and then told that he would be supervised, it is clear to me that both parties were under the impression that there was a connection between them which amounted to a legal agreement. Furthermore, the facts which led to this claim suggest that the respondent does understand itself to be able to regulate and discipline its ministers. I accept that there was an intention to create legal relations, though the precise nature of those legal relations may not have been clear to all at the time of the agreement.
7.3. Once I have formed the view that there was an intention to create legal relations I must then look at other matters to consider whether, in this case, there was a contract of service. I am satisfied that there was a degree of control exercised over the claimant by the respondent, particularly in administrative matters such as reporting to the national office. I am also satisfied that ministers were central to the running of the organisation and therefore well integrated into it. For tax and national insurance purposes and in relation to disciplinary matters the claimant was treated in a similar way to an employee. As for mutuality of obligation, there was clearly sufficient work for the claimant to carry out and the expected level of services as reflected in the forms he was required to complete and return to the national office, supports the view that there was such an obligation on both parties. Whilst I accept that the claimant exercised a high degree of autonomy and his salary was dependent in part on funds raised through his own local church, I am bound to consider matters as a whole and do find that this was indeed a contract of service. For these reasons, I find that the tribunal has jurisdiction to hear the claimant's claims which will proceed to a hearing.’"
38. Pill LJ proceeds to set out the tribunal’s findings in relation to the role of pastors within the Church of God. It is enough for present purposes to record that, unsurprisingly, the evidence emphasised the spiritual duties of a pastor, describing him as a “spiritual shepherd”. He then turns to consider the cases which we have already reviewed – that is, Parfitt, Davies, Coker and Percy. The argument of counsel for the Church was that Percy had not overruled those authorities “on their facts” and that the facts of the instant case were closer to those of those earlier cases: he relied in particular on the fact that the minister in Percy, unlike the claimant, had enjoyed written terms and conditions assuring her of a minimum level of salary and the right to occupy a manse. As to that, Pill LJ concludes, at paras. 35-36 (p. 293):
“35. Lord Nicholls's reasoning, at para 23, is not that of overruling the earlier cases and Davies's case would not in any case be overruled unless expressly. What Percy's case does, however, is establish that the fact-finding tribunal is no longer required to approach its consideration of the nature of the relationship between a minister and his church with the presumption that there was no intention to create legal relations. The earlier cases, as explained, do not exclude that possibility; strong statements in Percy's case leave it open to employment tribunals to find, provided of course a careful and conscientious scrutiny of the evidence justifies such a finding, that there is an intention to create legal relations between a church and one of its ministers: Lord Nicholls, at para 26, Lord Hoffmann, at para 63, Lord Scott, at para 137, and Baroness Hale, at para 151. The chairman was not bound by authority to reach a different conclusion. It is recognised that a spiritual motivation in working for a church does not necessarily preclude an intention to create legal relations.
36. The guidance to be followed is, in my view, that stated by Lord Nicholls, at paras 23-26 of his speech in Percy's case  ICR 134. It was found that there was in Percy's case an intention to create a legally binding relationship but the earlier authorities were not overruled. As Dillon LJ stated in Parfitt's case  ICR 176, 183, "the spiritual nature of the work and the spiritual discipline under which it is performed must be very relevant considerations when it has to be decided whether or not there is a contractual relationship".
39. Pill LJ then goes on to consider the art. 9 point. He concludes, at paras. 45-49, that the approach adopted in Parfitt – namely, in Dillon LJ’s words, that “the spiritual nature of the work and the spiritual discipline under which is performed must be very relevant considerations when it has to be decided whether or not there is a contractual relationship” – is consonant with the requirements of art. 9. One aspect of that principle was that where the beliefs of a particular Church were incompatible with the existence of a contractual relationship between it and its Ministers the law should be slow to impose such a relationship.
40. Pill LJ’s conclusions are set out in paras. 50-55 (pp. 297-8), as follows:
“50. The chairman was the fact-finding tribunal and her findings of fact are clearly and carefully set out. On these findings the chairman was, in my judgment, entitled to reach the conclusions she did, first that there was an intention to create legal relations, though I acknowledge that the treatment of the spiritual dimension was sparse, and, secondly, that the contract was a contract of employment. I agree with the conclusion of the appeal tribunal. The chairman was not precluded in this case by the nature or contents of the minutes, or the absence of a formal contract, from reaching those conclusions.
51. The duties as pastor at Harrow were found to be substantial, although a discretion in the manner of performance was present, as would be expected. The standards to be expected of a pastor, and guidelines as to what the pastor was expected to do, are set out in the minutes. There was an obligation to report regularly to the national office. Salary was paid from that office; the claimant was described as an employee on the pay advice slips and income tax and national insurance contributions were deducted. The chairman was entitled to conclude that the contract found to exist was a contract of employment.
52. Further, a ministers' seminar was held in March 2003 and a document (cited by the chairman) entitled "Legal requirements and church accounting", signed by Bishop McLeod, emerged from it. While it provided that ministers were office holders and not employees and "technically they do not receive a salary, they receive a stipend", it was recognised, at para 4.8.2, that
‘currently the Government is reviewing the employment status of ministers and I suspect in the near future there will be some modification to minister's employment status, but until then ministers remain office holders as opposed to employees.’
It is significant that the possibility is viewed with apparent equanimity and without reference to it being contrary to the respondent's religious tenets.
53. I do not consider that the dependence of salary on local collections, in the context of a prosperous local church such as Harrow, negatives the existence of a contract of employment. It was a factor the chairman had in mind, but not a decisive factor, as alleged by the respondent. Obligations are placed on church members to contribute substantially to their local church.
54. It was a ground of appeal that it was not established that the respondent, rather than either the local church or the Church of God in the USA, was the employer. On the evidence and the chairman's findings, I do not consider either proposition to be tenable.
55. It will be clear from my earlier statements that upholding the employment tribunal's conclusions and decision in this case does not involve a general finding that ministers of religion are employees. Employment tribunals should carefully analyse the particular facts, which will vary from church to church, and probably from religion to religion, before reaching a conclusion.”
In short, he agreed that the facts relied on by the chairman justified her finding that the claimant was employed under a contract of service. Despite the conclusions which we have summarised at para. 39 above, he did not believe that this was a case where, on the evidence, according employment status to a pastor would be contrary to the tenets of the Church (see in particular para. 52).
41. Arden LJ expressly agreed with the reasoning of Pill LJ at paras. 50-55 of his judgment. She nevertheless considered two aspects of the case in more detail under the headings “Article 9 of the European Convention of Human Rights” and “Contractual Principles”.
42. As regards the former, like Pill LJ she held that art. 9 would be engaged where a religious body has beliefs which are inconsistent with the existence of a contract of employment between it and its ministers but not simply by the existence of litigation between them (see para. 62, esp. at p. 300 B-C).
43. As regards contractual principles, Arden LJ says, at paras. 63-64 (pp. 300-1):
“63. The respondent also relied on the spiritual duties owed by a minister. In some of the earlier authorities, including President of the Methodist Conference v Parfitt  ICR 176, 183h , there are statements suggesting that there is a presumption against holding that a minister and the religious organisation to which he belongs intend to enter a legally binding contract of employment. Although Lord Nicholls of Birkenhead does not exclude the possibility that in some circumstances such a presumption might be appropriate, Lord Hope of Craighead, with whom Lord Scott of Foscote agreed, and Baroness Hale of Richmond reject such a presumption, at paras 121, 137 and 151. In so doing, Baroness Hale seeks to reverse the trend demonstrated by those decisions, which had the effect of excluding ministers of religion from increasingly important legislation in the employment field: see eg Davies v Presbyterian Church of Wales  ICR 280, which by implication was decided on the basis of lack of intention to enter into contractual relations. The fact that religious communities like those in Koeller's case  2 BCLC 379 exist is one of the reasons why it will continue to be necessary under domestic law to decide the question whether by virtue of that belief there was no intention to create legal relations in some cases involving ministers of religion.
64. In some of the earlier authorities it is said that the existence of spiritual duties is "very relevant" or "central". In my judgment, the existence of spiritual duties is certainly a matter to be taken into account but the weight to be given to them must depend on the overall assessment of the evidence. (I illustrate this with an example below.) As Baroness Hale explains in Percy's case  ICR 134, the mere fact that a minister performs spiritual duties does not mean that he does not have a contract of employment with the organisation to which he ministers. Rather more is required. The same point is made by Lord Hoffmann, in his (dissenting) judgment, at para 61. Lord Nicholls and Baroness Hale in particular, with whom Lord Scott agrees, consider that ministers of religion should in appropriate cases have the benefit of modern employment legislation: see per Lord Nicholls, at para 26, and per Baroness Hale, at para 148. In this respect the decision in Percy's case is an instance of the courts fulfilling their time-honoured role of updating the common law and making it more suitable for modern circumstances. But neither Lord Hoffmann nor Baroness Hale, in my judgment, is addressing the exceptional situation in which the finding of a contract (or of a contract of employment) would offend a religious belief. No such belief was asserted in Percy's case. That case turned principally on the questions whether there was any presumption against the existence of a contract in the case of ministers of religion, and whether the dispute was a spiritual matter assigned by statute to the courts of the Church of Scotland. I can illustrate my point that the weight to be given to spiritual duties must depend on the circumstances by taking the following example. In Percy's case, the appellant was an associate minister appointed by the central governing body of the Church of Scotland. Her principal role was to assist the minister of certain linked parishes. (I leave out of account her additional role as a prison chaplain.) It would, as it seems to me, have been easier to imply a contract of employment in Percy's case if the appellant had, instead of being an associate minister, been on the staff of a school, holding services in the school chapel and providing support for students and so on. This would be so even though in both cases she owed spiritual duties. As a school chaplain, the inference of an employment relationship would have been stronger because of the evidence that she was on the school staff and so on.”
44. Lawrence Collins LJ delivered a one-paragraph judgment essentially agreeing with Pill LJ.
45. We should for completeness mention the decision of this Tribunal (Lady Smith sitting alone) in Macdonald v Free Presbyterian Church of Scotland (UKEAT/0034/09), although it was not cited to us. This concerned a claim of unfair dismissal by a minister of the Presbyterian Church. An employment judge held that the claimant was an officer-holder and not an employee. The claimant appealed to this Tribunal on the basis only that the decision was inadequately reasoned. Lady Smith rejected that contention. She gave at paras 52-63, a helpful overview of the state of the law in this area; but as she acknowledged, no issue on it strictly speaking arose, and she certainly did not have to consider the particular points arising on this appeal.
THE TRIBUNAL’S DECISION
46. The Employment Tribunal set out the facts essentially as we have done and reviewed the authorities to which we have referred. At paras. 12-14 it said this:
“12. We approach our decision in this case upon the basis that the House of Lords in Percy does not over-rule the decision of the Court of Appeal in Parfitt on its facts. We bound by Parfitt unless it can be distinguished. It is useful to go back to the three tests set out in the judgment of McKenna J in the Ready Mixed Concrete case. In relation to the first of these tests (remuneration in consideration for work), it is clear that all Ministers in the Methodist church are remunerated in the sense that they are provided with a stipend, but that alone is not enough. It seems to us that the true position is as set out by Dillon LJ in Parfitt in the passage we have quoted from paragraph 17 of the judgment. We heard no evidence to suggest that the position of this claimant was different from that of any other Methodist Minister. Work and pay were not dependent on each other as they are in the normal relationship which exists under a contract of employment.
13. In relation to the second test in Ready Mixed Concrete (control) we find that the claimant was, by paragraph 520 of the standing orders, subject to a degree of control by the Conference of the Methodist church. That appears to us to have been the case under both the old and the new versions of this paragraph and the addition of the words on “behalf of the Conference” do not seem to us to add greatly to that proposition. It is clear from the evidence that the Conference of the Methodist church has always been supreme in church affairs. The addition of the words to which I have referred seems only to reinforce that proposition. An important feature of the decision in Parfitt and recognised by Lord Nicholls in Percy, was the provision of the standing orders in relation to resignation. In the ordinary relationship of employer and employee, and subject only to contractual provisions about the length of notice, either party can bring the contractual relationship to an end. The employer can dismiss the employee and the employee can resign. The relationship between the Methodist Conference and the Minister cannot, according to standing orders, be terminated in that way. If the Minister gives notice of his or her desire to resign then it is up to the President, after taking advice, to decide whether or not the resignation should be accepted.
14. In summary, the claimant has not persuaded us that her position is substantially factually different from the position of the Minister in Parfitt. We refer particularly to the arrangements as to stipend and as to resignation. As I have said, we regard ourselves as being bound by Parfitt unless it can be distinguished on the facts. We do not decide this case upon the basis that there is any presumption for or against the existence of a contract of employment in the case of a Minister of Religion. For these reasons we find that the claimant did not enter into, nor did she work under, a contract of employment. Accordingly, she is not qualified to bring a claim of unfair dismissal and her claim is dismissed.”
47. With respect to the Tribunal, there seems to us to be some confusion in this reasoning. At the beginning and the end of the passage the Tribunal states plainly that it regards itself as bound by Parfitt unless it can be distinguished – which in practice means unless the material facts could be shown to have changed in the period since Parfitt was decided; and since it evidently believed that that was not the case the claim fell to be dismissed on the straightforward basis that there was no contract between the Claimant and the Church. But on that basis it is unclear why the Tribunal thought it necessary to undertake, in the central part of the passage, an assessment of whether the contract between the Claimant was one of service or for services (though we note that although it embarks on the process it does not appear to complete it). We proceed on the basis that the Tribunal’s primary reasoning was that it was bound by Parfitt to hold that there was no (relevant) contract between the Claimant and the Church.
48. The Claimant sought a review of the Tribunal’s decision, but the application was refused. Employment Judge Parker said:
“The decision of the Court of Appeal in Parfitt v The President of the Methodist Conference was a decision on its facts. It is suggested that the decision in that case was founded, in whole or in part, upon a presumption that a Methodist minister was not an employee, or, more specifically, that in the case of the relationship between such a minister and the President of the Methodist Conference, there is a presumption against there being an intention to create legal relations.
The tribunal did not interpret Parfitt as having being decided upon the basis that there was such a presumption. It found that Parfitt was decided upon its facts (see paragraphs 5 and 9 of the judgment).
The House of Lords in Percy v Church of Scotland Board of National Mission did indeed hold that such a presumption no longer exists. It also held that the decision in Parfitt was good on its facts (see paragraph 12 of the tribunal’s judgment).
The tribunal’s decision was based upon the facts as found and the tribunal was unable to distinguish the case from Parfitt, on its facts.”
WAS THE TRIBUNAL BOUND BY PARFITT ?
49. The essential question here concerns the effect of the reasoning in Percy on the authority of Parfitt. We have not found this straightforward. The case-law is difficult to analyse and different passages in the judgments and opinions in Percy and Stewart can fairly be said to point in different directions. The Tribunal’s analysis of the relationship between Percy and Parfitt is tenable. Nevertheless after careful consideration we have come to the conclusion that it is wrong.
50. The starting-point must be to establish what was decided in Percy. As we have already observed, and as Arden LJ says in Stewart (see para. 64), Lord Nicholls and Lady Hale (and indeed Lord Hoffmann) plainly intended some departure from what they perceived as the trend of the previous authorities (including Parfitt). Lady Hale’s overall position is stated quite explicitly at para. 151, where she says that there should be no presumption of a lack of intention to create legal relations between members of the clergy and their Church. Lord Nicholls’ position is not quite so straightforward because at para. 23 he says that a “rebuttable presumption” against an intention to create legal relations “may have a place”, and he appears to cite Parfitt as an example of that presumption being appropriately applied. But the following paragraphs of his opinion point firmly in the opposite direction. Para. 24 says that the presumption cannot apply to “arrangements which on their face are to be expected to give rise to legally-binding relations” and treats as a paradigm of such a case “the offer and acceptance of a Church post for a specific period, with specific provision for the appointee’s duties and remuneration [etc]”; and paras. 25 and 26 seem intended to establish a general rule under which all holders of posts within a church, whether “primarily religious” or not, are treated as employees. We return below to the difficulty of reconciling these paragraphs with para. 23; but viewing the passage as a whole we can see no real difference between Lord Nicholls’ approach and Lady Hale’s – and it is clear that Lady Hale perceived none. In both cases what they say is clearly part of the reasoning supporting their conclusions and must be regarded as ratio. That being so, it was adopted by Lord Scott and forms part of the authoritative ratio of the decision. (It accordingly does not matter that Lord Hope’s reasoning in reaching the same conclusion may be narrower.) It is clear also that Lord Hoffmann took the same view on this aspect of the case.
51. We appreciate that we have thus far done no more than get to the point established by Pill LJ in Stewart, by which we are anyway bound: see para. 35 of his judgment, where he says that Percy establishes that a tribunal “is no longer required to approach its consideration of the nature of the relationship between a minister and his Church with the presumption that there was no intention to create legal relations”. But we have felt it necessary to go through the exercise in order to feel firm ground beneath our feet.
52. The difficulty comes with where that leaves Parfitt. At para. 35 of his judgment in Stewart Pill LJ points out that Lord Nicholls did not purport to over-rule Parfitt; and it could indeed be said that para. 23 of his opinion suggests that it was right on its facts. It is thus entirely understandable that the Tribunal should have taken the view that Parfitt remained authoritative in a case with substantially the same facts. But in the end we do not think that that view can be sustained. The conclusion of Dillon and May LJJ in Parfitt, and of Waterhouse J. whose reasoning they endorsed, was based essentially on the spiritual nature of a minister’s role: such other specific points as they made (e.g. in relation to the nature of a minister’s stipend) were merely supportive of that general point. But the spiritual nature of a minister’s role is the basis also of the presumption against intention to create legal relations which was disapproved in Percy. If it is illegitimate to rely on the spiritual nature of the role as the basis of a general presumption, it must equally, it seems to us, be illegitimate to rely on it without more as the basis of a specific finding. It comes to the same thing: in other words, we can see no difference in substance between saying “because of the minister’s spiritual role there is a presumption against any intention to create legal relations, and that presumption has not been rebutted” and saying “because of the minister’s spiritual role (and nothing else) we find that there was no intention to create legal relations”. It seems to us clear that Lord Nicholls and Lady Hale meant to hold that the spiritual role of a minister could not by itself justify denying contractual effect to an arrangement which otherwise had the necessary indicia of a contract: thus Percy has not simply disapproved the erection of any general principle on the basis of Parfitt but has undermined its actual reasoning, at least as regards whether stationing – as opposed simply to ordination – gives rise to a contract. It follows that the distinction drawn by the Tribunal has no content.
53. We appreciate that that conclusion sits awkwardly with para. 23 of Lord Nicholls’ opinion in Percy, which appears to accept that Parfitt was rightly decided. Lady Hale’s comment at para. 151 that “all these cases depend upon their own particular facts” likewise, though less clearly, implies an acceptance that Parfitt may have been rightly decided on its facts. However:
(1) The House did not, and did not have to, consider whether the result in Parfitt could stand in the light of its ratio.
(2) Structurally, para. 23 fits into Lord Nicholls’ reasoning as the first half of what used to be called a “confession and avoidance”: that is, he is conceding a point which tends in one direction preparatory to explaining why his final conclusion is to the opposite effect. The real thrust of his reasoning is at paras. 24-26. Lady Hale’s observation about Parfitt is even less central to her reasoning.
(3) In so far as there is a difficulty in reconciling the concession that Lord Nicholls apparently made in para. 23 with the general approach that he recommended in paras. 24-26 – as we confess we think there may be – it is surely the latter which should prevail. These paragraphs, like the corresponding passages in Lady Hale’s opinion, prescribe a general approach, and if when that approach is taken an employment tribunal would reach a different conclusion from that reached by the Court of Appeal in Parfitt, even on similar facts, so be it.
(4) We note that both Lord Nicholls and Lady Hale used language suggesting that perceptions were changing about the appropriate scope of employment rights: see the reference to “today” in para. 25 and “in this day and age” in para. 148. A possible reconciliation might be that whereas it would have been reasonable to conclude in 1983 that the parties to the arrangements found in Parfitt did not intend to create legal relations, such a conclusion would not be reasonable twenty years later – though we cannot conscientiously say that any such reasoning clearly appears in the opinions in Percy. (Another possible reconciliation would be that Parfitt was understood to decide only that ordination, as opposed to stationing, created no contract – but still less can we say that this point can be explicitly found in Percy.)
54. Much of Mr Hyams’ argument was directed to supporting the Tribunal’s finding that there was no significant difference between the arrangements and governing documentation as they stood at the time that Parfitt was decided and those in force now. That was indeed the thrust of Mr Howcroft’s statement. There were, he acknowledged, various changes of wording in the Standing Orders, and he accepted that the pamphlet which contained the statement about the status of the stipend to which Dillon LJ attached some importance was no longer in print; but he submitted that the differences were not of substance. We are inclined to agree, and if we regarded Parfitt as still authoritative it may be that it could not be properly distinguished. But for the reasons given we do not believe that the reasoning of Parfitt can be sustained in the light of Percy, even on the same facts.
THE POSITION IF PARFITT IS NOT BINDING
55. The issues before the Tribunal were (1) whether the arrangements between the Claimant and the Church amounted to a contract and (2), if so, whether any such contract was a contract of service. We take them in turn
(1) WERE THE ARRANGEMENTS CONTRACTUAL ?
56. We are in as good a position as the Employment Tribunal to determine this question. It requires to be determined objectively, by reference to primary facts which are almost wholly documentary in character and are not disputed. It seems to us clear that if the facts are examined untrammelled by Parfitt the arrangements between the Claimant and the Church were contractual in character, at least from the moment of her appointment to the Redruth Circuit. They involved the offer and acceptance of a church post for a specific period. The duties of that post, if not precisely prescribed, clearly appear in general terms from the CPD and the report referred to at para. 14 (2) above and will have been well understood. The CPD provided with specificity for remuneration, payment of expenses, holiday and accommodation. The arrangements thus fall squarely within Lord Nicholls’ description of the kind which “on their face are to be expected to give rise to legally-binding obligations”: see para. 24 of his opinion in Percy. His general conclusion at para. 26 likewise plainly applies. Substantially the same features of the relationship – salary, expenses, accommodation – were relied on by Lord Hope and Lady Hale (see paras. 30 and 31 above).
57. In reaching that conclusion we do not in any way overlook or discount the centrality of the spiritual nature of a minister’s role, eloquently set out in Mr. Howcroft’s witness statement. He says, at para. 19:
“It is therefore my understanding that from a spiritual and theological point of view and in the terms of the constitutional practice of the Methodist Church, Lord Justice Dillon's analysis in paragraphs 18 and 19 of his judgment is correct and still applies. The spiritual nature of the functions of the minister, the spiritual nature of the act of ordination by the imposition of hands, and the doctrinal standards of the Methodist Church which are fundamental to that Church and to the position of every minister in it mean that the minister sets out to serve God as his or her master. The primary relationship and commitment is with and to God. There is then a secondary relationship with and commitment to the Church, expressed and effected through being in full connexion with the Conference. Moreover, this secondary relationship is not in the first instance with a particular Church or Circuit but with the Conference and thereby the Methodist Church as a whole (i.e. the Connexion), which stations the particular minister to a succession of particular appointments. It is also intended to be for life. I do not therefore believe that at the point of ordination or reception into full connexion a minister enters into a contract of service with the Methodist Church, still less with a particular Church or Circuit. If I try to envisage such a contract of service then, since the commitment is for life, I can only see it turning into a contract of servitude, as Lord Justice Dillon noted in paragraph 22.”
But we do not see, any more than Lord Nicholls, Lord Hoffmann or Lady Hale did, any necessary incompatibility between being the servant of God and being an employee of the Church. There is nothing in Mr Howcroft’s statement, nor in any of the other evidence, that amounts to a statement that it is contrary to the doctrine of the Methodist Church that a minister should be in a contractual arrangement with the Church, such that there might be a conflict with art. 9 of the kind discussed – but not found – in Stewart. The nearest is Mr Howcroft’s endorsement of the statements about the nature of remuneration quoted at para. 14 (1) above; but to say, no doubt entirely truly, that the purpose of the payment of stipend is to free ministers from basic financial concerns does not seem to us inconsistent with the payment so made having the character of contractual remuneration. We note that stipend is paid only for “active work”: see para. 12 above. The position is indeed less strong than in Stewart, where (see para. 7 of the chairman’s findings quoted at para. 35 above) the claimant had no certainty of receiving any fixed sum. We have taken into account in reaching that conclusion the Tribunal’s finding, at the end of para. 12 of the Reasons, that “work and pay were not dependent on each other as they are in the normal relationship which exists under a contract of employment”, albeit that on its face that finding is directed to a different issue. That finding appears to be based on Dillon LJ’s citation of the pamphlet referred to at para. 20 above. As we read Dillon LJ’s judgment the passage quoted from the pamphlet was simply one element in his assessment that the role of a minister was essentially spiritual; since that conclusion has been held no longer to create a presumption against a contractual relationship, we doubt whether the passage is now of central importance. But in any event the pamphlet is no longer in print, and the relevant evidence about remuneration has been identified above. We see nothing in it which justifies the Tribunal’s conclusion.
58. We have also taken note of the importance attached by the Tribunal at para. 13 of the Reasons – though again, strictly, for a different purpose – to the fact that under the Standing Orders a minister may not unilaterally resign from full connexion. But we do not see how that has any bearing on the different question of whether a minister may resign from a specific post.
59. We should mention one point arising from Mr Howcroft’s statement. The proposition that he appears to be seeking to answer is a proposition that it is ordination which creates a contractual relationship between the Church and a minister. That is understandable, because the Claimant in her ET1 claims to have been employed since 2001 (though that in fact pre-dates even her ordination, being the year in which she became a “probationer minister”). It is also understandable because, as we read the documents, the Church itself sees its responsibility for ministers – whatever its nature in law – as starting when they are received into full connexion. But we need not and do not go that far. The argument before us focused on the Claimant’s position as Superintendent Minister for the Redruth Circuit: that is the position from which she resigned, and Mr Howcroft himself makes the point (at para. 2 of his statement) that unlike in the case of Mr. Parfitt no step had been taken to remove her from full connexion (in Anglican parlance, to defrock her). We have not examined the Claimant’s position in the period between her ordination and her appointment to Redruth, or more generally the position of ministers who have been received into full connexion but who are not stationed on a Circuit or appointed to some other active role.
60. Although our conclusion is based on the statements of principle in Percy rather than on a comparison between the facts of that case and this, it is reinforced by the fact that it is difficult to see any substantial distinction between the position of the applicant in that case – or indeed of the claimant in Stewart – and that of the Claimant in the present case.
61. Mr Hyams in his written and oral submissions placed considerable emphasis on the provisions of art. 9 of the Convention and submitted that the authority of Percy is undermined by the absence of any reference to it in the opinions of the members of the House. We do not understand this. This is not, as we have said, a case where the evidence established that the existence of a contract of employment between the Church and a minister was contrary to its tenets. The doctrine of “the priesthood of all believers”, to which the Methodist church subscribes, is not inconsistent with the existence of a particular role for ministers. Mr. Hyams also emphasised the difficulties that might arise if a tribunal were called upon to adjudicate on doctrinal disagreements – though it does not appear that any such issues would arise in the present case if it were to proceed. But we cannot conceive that any claim within the jurisdiction of the tribunal would require it to determine disputed issues of doctrine as such.
(2) WAS THE CONTRACT A CONTRACT OF SERVICE ?
62. In at least the judgment of May LJ in Parfitt the question whether, if there were a contract between the applicant and the Church, it was a contract of service was separately considered. It could therefore be argued that even if the Court’s ratio based on absence of intention to create legal relations was no longer good law its conclusion on this issue stood: this question did not of course fall for decision in Percy. But on a fair reading it seems to us that May LJ’s conclusion on this issue was equally based on what he saw as the peculiar position of a minister of religion. In our view the spirit if not the letter of the reasoning in Percy means that such reasoning is illegitimate; and Stewart has since confirmed that a clergyman appointed to minister to a particular church or group of churches may be an employee. Accordingly this issue too is not determined by binding authority. Although, as we have noted, the Tribunal did appear to address the “service or services” question, its reasoning is short and not very clear, and we believe that it is flawed for the reasons given at paras. 57 and 58 above.
63. Again, we do not believe that this is an issue which we need remit. In our view the Claimant’s contract was one of service. Once it is accepted that there is nothing in the Claimant’s spiritual role which is inconsistent with her being an employee, and once the question whether there was anything special about the nature of the Claimant’s remuneration is decided, all the indications point one way. She received regular remuneration, including an entitlement to sick pay. She was given accommodation. She was required to engage in an appraisal process, was subject to at least a degree of supervision from the Church and was liable to a disciplinary procedure. Although she did not have to work set hours, there was a clear concept of working time, when she was at the disposal of the Church, and holiday, when she was not. Of course, like any professional she had a great deal of discretion as to how she did her work, but that is in no way inconsistent with a contract of service. Again, we see close parallels with the facts in Stewart - and indeed Percy, where Lord Hoffmann at least was certain, albeit that the point was not in issue, that the applicant would, if she had not been an office-holder, have been an employee (see para. 66 of his opinion, quoted at para. 33 above).
64. We allow the appeal and remit the case to the Employment Tribunal to determine the claim of unfair dismissal on its merits. There is no reason why it need be considered by the same Tribunal – though equally no reason why it need not be.