United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	Mr Antony Sendall (of Counsel) Messrs Geoffrey Leaver Solicitor 251 Upper Third Street Bouverie Square Central Milton Keynes Buckinghamshire MK9 1DR
For the Respondent	Mr Daniel Barnett (of Counsel) Messrs Stone King Solicitor 13 Queen Square Bath BA1 2HJ


 


Summary

Tribunal correct in finding between church and pastor an intention to enter into legal relations with sufficient characteristics of a contract of service.


 


HIS HONOUR JUDGE ANSELL

1. This is an appeal from a decision of a Watford Employment Tribunal (Chairman Ms I Manley sitting alone) dated 30 March 2006 who determined that the Respondent's position as Pastor of the Harrow Church was governed by a contract of employment between the parties and accordingly he was entitled to bring a claim for unfair dismissal. Leave for this hearing was given by HHJ Birtles in an order dated 24 May 2006, which directed that the full hearing of the appeal should be heard before a judge and two members.
2. Within the appeal the Appellant complains in a number respects about the reasoning of the Tribunal below and in particular that it erred in law by failing to identify and distinguish between the duties owed by the Respondent as a Bishop/Minister, which emanated from his credentials granted by the Church of God in the USA and the duties of his Pastorate. However, at the heart of the appeal is a consideration of whether previous cases, which have determined that a Minister of religion was not an employee of the relevant church, because there was no intention to enter into legal relations because of the unique nature of a Minister of religion being appointed to carry out spiritual duties only are still good law in light of the House of Lords decision in Percy v Church of Scotland Board of National Mission [2006] IRLR 195.
3. The background facts are that the Appellants are a Christian church, the aim of which is the propagation of the gospel according to the acts and teachings of the Church of God based in the USA. The Church is represented in 170 countries, known in some of those countries as the Church of God, but in others, including the UK, it is known by the title of the Appellants. The UK church is a company limited by guarantee and is a registered charity. It has 108 churches in the United Kingdom. Within the UK there are 295 ordained Ministers but only about 88 of them are based in Churches, where they receive payment for services that they render, sometimes referred to as a salary and sometimes as a stipend.. The American Church determines and awards various levels of ordination.
4. Every two years the Church holds an international general assembly and publishes the minutes of that assembly which essentially set out the background rules as to how churches in international community should be run. Whilst the minutes set out the method of payment for Pastors known as compensation and indeed suggested minimum compensation scales, there was no finding by the Tribunal as to how closely the UK church followed these guidelines.
5. The Respondent had been a member of the Church for most of his life and worked as a driving instructor between 1971 and 1999 although, during that time, he was involved in different levels in the Church in Harrow, moving up through the various levels of ordination until 1984, when he became an ordained Minister. He was also entitled to use the title Bishop, and during this period, the Tribunal found that he was involved in carrying out duties as a Minister at the Harrow Church.
6. The UK Church has a National Office based in Northampton, which carries out various administrative functions. There are administrative staff at that headquarters, together with two ordained Bishops as well as an executive council of some 10 Bishops. The office exercises a payroll function, arranges meetings and seminars for Ministers, and is involved with the decisions on increases in Ministers salaries and audits of local churches. In 1999, following an audit carried out at the Harrow church which had suggested to the National Office that there were some funds which were not properly accounted for, it was agreed in future that the Respondent would receive payment through the payroll in Northampton on a PAYE basis. The church's evidence was that the Respondent was reprimanded with respect to issues arising from that audit and was told that he should have supervision. It was also around that time that the Respondent ceased working as a driving instructor and became the Pastor of the Harrow Church, receiving his salary through the payroll in Northampton, as well as joining the church's pension scheme. There was no formal/written contract, but at paragraph 4.4 the Tribunal found "there was therefore an agreement, which was not reduced to 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 that National Office."
7. The Pastor's remuneration was paid out of a local tithe paid by the church members. The church's tradition was that the members were expected to pay around 10% of their salary to the church and of that sum a proportion was forwarded to the National Office to fund that office and also the International Office. The other moneys were held in a bank account from which the salary was paid after deduction of tax and national insurance. If the local branch did not send in sufficient funds to cover the salary, the Appellants would give one month's grace but no more than that, although there was never a problem with the Harrow Church, where there had always been sufficient funds. The Tribunal records that there were other churches where payment had been suspended or the Minister had himself acknowledged that, there was insufficient funding to cover his payment.
8. The Tribunal also found that all the Church Ministers who were responsible for churches as Pastors such as the Respondent, were required to provide certain information to the Appellant's Northampton Office. For example, the Minister was required to fill in a monthly report form, which included his ministerial file number and rank and also tick boxes next to sections for "special services" "evangelising" "pastoring" and other. There was also a section asking for numbers, for example, of pastoral visits and details of the amount of tithes collected in the local church and paid to National Office.
9. The Appellants' view was that Ministers were not employees but were office holders receiving a stipend, although at a seminar in 2003 Bishop Mcleod, one of the administrative Bishops, did note that the government were reviewing the employment status of Ministers.
10. The Tribunal also recorded the Respondent's duties in terms of services, prayer meetings, choir practice, youth club and pastoral visits, as well as administrative matters in particular the completion of forms referred to above. The Tribunal also noted that the Respondent collected monthly mortgage payments and took them to the bank. These appear to be in respect of the local church.
11. In January 2005 financial irregularities appeared following an audit carried out at the church and eventually in June 2005 the Respondent was informed that he had been found guilty of unbecoming conduct and misappropriating funds from the Appellant. He had been sent a P45 which, like his salary slips, indicated that the Appellant was his employer. He remained an ordained Minister, but since his removal from the Harrow Church, had not been appointed to any other church, nor had he been paid a salary.
12. As he had done below, Mr Sendall, on behalf of the Appellants, took us through a series of cases, which he submitted clearly set out the presumption that as between a Minister of religion and his church there was no intention to create legal relations and accordingly that there was no employment contract between the parties.
13. In President of the Methodist Conference v Parfitt [1984] ICR 176, the issue arose as to whether there was a Contract of Employment between the Applicant and the Methodist Church. The majority of the industrial Tribunal had held that the detailed arrangements between a minister and the Church, set out in the church's rule book, and the high degree of control to which a minister was subject, indicated the Applicant was employed by the church under a contract of service. On appeal to the Court of Appeal, it was held that a correct appreciation of the spiritual nature of the relationship between a minister and the Methodist Church, showed that the arrangements between the minister and the Church, in relation to his stationing throughout his Ministry and the spiritual discipline which a church was entitled to exercise over the minister in relation to his career were non-contractual. At page 183H Dillon L.J. said this:-

"I have no hesitation in concluding that the relationship between a church and a minister of religion is not apt, in the absence of clear indications of a contrary intention in the document, to be regulated by a contract of service. I do not doubt that there probably are binding contracts between the Methodist Church and its ministers in relation to some ancillary matters, such as the compulsory superannuation scheme and the obligation, of which Mr. Parfitt told us, on trainees to repay a proportion of the expense of their training if they do not remain in the ministry for at least 10 years. These however are no part of the contract of service, either on reception into full connection or on appointment to a circuit, which Mr. Parfitt seeks to set up."

14. In Davies v Presbyterian Church of Wales [1986] ICR 280 this issue came before the House of Lords. They held that the question whether the Applicant was employed under a contract of service was a question of law to be determined on the true construction on the Church's book of rules; that under those rules, the duties of a Minister were of an exclusively spiritual and non-contractual nature and for its part the church had no obligations in law, in respect of its ministers other than the correct administration of its trust funds and property, providing for their housing and stipends and a duty not to deprive them of a salary pastorate save in accordance with the provision of the rules and accordingly there was no contract of employment between the applicant of the church and the Industrial Tribunal had no jurisdiction to entertain his complaint of unfair dismissal. At page 289C Lord Templeman set out the position thus:-

"My Lords, 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. 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 would sever the link between minister and congregation.

The duties owed by the church to the pastor are not contractual. The law imposes on the church a duty not to deprive a pastor of his office which carries a stipend, save in accordance with the procedures set forth in the book of rules. The law imposes upon the church a duty to administer its property in accordance with the provisions of the book of rules."

Later at page 290B he said this:-

"Until the applicant was deprived of his pastorate in accordance with the procedures laid down in the book of rules, he was entitled to be paid his stipend out of the income of the sustentation fund and to occupy his manse. But the committee of the sustentation fund were not liable to pay the stipend otherwise than out of the income of the fund and the managing trustees of the manse were not liable to discharge the rates and expenses of the manse otherwise than out of voluntary contributions and church funds made available to them for that purpose. 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 rule, and an obligation to ensure that no member of the church was unlawfully deprived of a benefit form 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 imagination can such an agreement constitute a contract of service. Similar conclusions were reached by Joyce J. in In re Employment of Ministers of the United Methodist Church.

15. In Santokh Singh v Guru Nanak Gurdwara [1990] I.C.R. 309, the Applicant had been appointed as a Granthi (priest) at a Sikh Temple in Smethwick. His duties were prescribed by the rules and constitution of the temple and by the temple's management committee. The Employment Tribunal had found that they had no jurisdiction to hear his application for unfair dismissal, again deciding that he was not an employee of the temple. The Court of Appeal approved the Industrial Tribunal's approach and held that the Tribunal had posed themselves the correct question in law, namely whether upon a true construction of the relevant constitutions of the temple and taking account of all the other circumstances, the Applicant was employed under a contract of service; and further since they had balanced the spiritual elements forming part of the Applicant's duties against those factors indicative of a contract of service, they were entitled to reach the conclusion that he was not employed under a contract of service. For the Respondents Mr Barnett sought to draw some comfort from a passage in this decision at page 314 letter F where Neill L.J. said thus:-

"In the course of his careful and valuable submission in support of the applicant's appeal, counsel advanced the following arguments, inter alia: (1) that he decision of the House of Lords in Davies v. Presbyterian Church of Wales [1986] I.C.R. 280 established the following propositions: (a) that an appellate body may review inferences which have been drawn from primary facts and may set aside any wrong inferences; (b) that there was no requirement that an inference had to be adjudged as being unreasonable before it could be set aside; (c) that it was possible for an individual to be employed as an employee to carry out duties which were predominantly spiritual. (2) That the appeal tribunal had been in error in applying the present case the principles laid down by the Court of Appeal in O'Kelly v. Trusthouse Forte Plc. [1983] I.C.R. 728. (3) That it was wrong to try to draw a close parallel between Christian churches and Sikh temples. Each Sikh temple is autonomous and the Sikh church as a whole is not a centralised body. Each temple negotiates its own terms with those whom it employs. (4) That there is no system of ordination or formal training for the priesthood in the Sikh religion. (5) That it was clear from the constitution of the temple that he applicant was under very strict control. Our particular attention was drawn to a number of the clauses in the 1985 constitution relating to the priest, including the provision in clause (g) that the priest "must not leave the Sikh temple on Sunday in any circumstances without the permission of the managing committee." (6) That it was an important factor that the applicant had been paid a wage or salary, that he got annual holidays and that he was under a duty to welcome visitors and pilgrims to the Sikh temple and make necessary arrangements for their board and lodging. (7) That, though they were not of central importance, the Immigration Rules were consistent with the view that he applicant's duties as Granthi were those of a person in employment.

These are powerful arguments and they have required careful and detailed consideration. In the end, however, I have come to the conclusion, though not without hesitation, that the industrial tribunal were entitled to come to the decision which they did. They posed themselves the correct questioning law. In accordance with the guidance given by the House of Lords in the Davies case [1986] I.C.R. 280, they examined and construed the constitution."

He argued that not withstanding the general principles set out in the Davies case it was still appropriate to look at the precise arrangements between the church and its minister, in terms of rights and obligations.

16. In Birmingham Mosque Trust Ltd v Alavi [1992] I.C.R. 435, the Applicant was a professor of Islamic studies at the University of the Punjab, who was appointed director and Khateeb of the Birmingham Central Mosque by the trust who was responsible for the maintenance of the mosque. The Tribunal had found that, the Applicant was an academic who undertook certain priestly work rather than a holy man and that the nature of the agreement between the parties was that of a contract of employment, in that it defined salary, hours of work and nature of the applicant's duties and that accordingly they had jurisdiction to consider his complaint. That decision was reversed by the EAT who held that where the Applicant had religious learning, had been appointed to perform religious duties, the Industrial Tribunal should ask themselves whether the applicant had a contract of service which entailed first asking whether he had a contract, which included consideration of whether there was sufficient certainty of offer and acceptance for the parties to be ad idem and whether there was intention to create a contractual relationship; and second if there was a contract whether it was a contract of service.
17. Finally in Diocese of Southwark and others v Coker [1998] ICR 140, the issue was whether a priest of the Church of England appointed to an assistant curacy was or was not employed under a contract of service or was simply the holder of an ecclesiastical office. The Court of Appeal held that the applicant was not an employee for the purposes of employment protection, given that the law required clear evidence of intention to create a contractual relationship in addition to the fact that the diocese was not the Applicant's employer, since it was not a legal person with whom a contract could be concluded. The Court held that an assistant curate as an ordained priest of the Church of England, was called to an office recognised by law and charged with functions designated by law as set out in the Book of Common Prayer, and therefore it was unnecessary for him to enter into a contract for the creation of execution of those functions, which in any event embrace spiritual, liturgical and doctrinal matters.
18. At page 146E Mummery L.J. said this:-

"In my judgment, the industrial tribunal was legally wrong in holding that there was jurisdiction to hear Dr. Coker's Claim. The error was in adopting an incorrect approach to the fundamental question whether there was a contractual relationship at all. The chairman started from the position, stated in the passage already quoted [1995] I.C.R. 563, 572, that an assumption should be made that there was a contractually enforceable agreement, in the absence of evidence to the contrary. That is certainly true in the case of "ordinary commercial transactions." It is not, however, the case in the relationship between a church and a minister of religion."

19. We turn to consider the recent Percy decision. Ellen Percy was appointed as an associate minister in a Church of Scotland parish in Angus in June 1994. The terms and conditions for the post sent by the Board of National Mission stipulated 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. In June 1997 a committee of inquiry was set up to investigate an allegation that she had an affair with a married elder in the parish. Mrs Percy was suspended with pay. Preparations were made for formal disciplinary proceedings; Mrs Percy then resigned as an ordained minister which brought to an end her appointment as an associate minister. She brought Employment Tribunal proceedings against the Church of Scotland claiming that she had been discriminated against on the grounds of sex and unfairly dismissed. The Tribunal dismissed both complaints on the grounds of jurisdiction, holding that the complaints comprised "matters spiritual" and fell within the exclusive jurisdiction of the courts of the Church of Scotland. Both the EAT and the Court of Session dismissed her appeal. According to the Lord President, where an appointment was made to a recognised form of ministry within the Church of Scotland and where the duties of that ministry were essentially spiritual, there was a rebuttable presumption that there was no intention that the arrangements made with the minister would give rise to obligations enforceable in civil law.
20. The House of Lords by a majority, Lord Hoffman dissenting allowed the appeal and remitted the case to an Employment Tribunal. The House of Lords were only concerned with the sex discrimination claim since the definition of employment in the Sex Discrimination Act 1975 was wider than that in the Employment Rights Act 1996. Section 230 of the Employment Rights Act defines employee and contract of employment thus:-

"Employees, workers etc

(1) In this Act "employee" means an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.

(2) In this Act "contract of employment" means a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing."

Under Section 82(1) of the Sex Discrimination Act 1975, employment is defined as "employment under a contract of service or an apprenticeship or a contract person to execute any work or labour". Mrs Percy accepted that she did not enter into a contract of service but that her case was that she was employed under a contract personally to execute certain work; that is a contract for services as distinct from a contract of service.

21. The House of Lords found that the Appellant was employed under a contract "personally to execute" work as an associate minister and was therefore entitled to bring her claim of sex discrimination. The documents on their face showed that the Appellant entered into a contract with the board to provide services to the church on agreed terms and conditions. The House of Lords held that there were many arrangements in church matters where the nature of the mutual obligations, their breadth and looseness and the circumstances in which they were undertaken pointed away from a legally binding relationship. This principle however, could not be carried into arrangements, which on their face would be expected to give rise to legally binding obligations. In the present case, their Lordships found the offer and acceptance of a church post for a specific period, with specific provision for the appointee's duties and remuneration, travelling expenses, holidays and accommodation fell firmly within this category. The agreement had all the ingredients that would be needed for it to be treated by the courts as intended to create legal obligations between the parties.
22. At paragraph 23 of Lord Nicholls in his speech said thus:-

"23 Intention to create legal relations

A further strand in the authorities, most notably in the judgment of Mummery LJ in Diocese of Southwark v Coker [1998] 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 [1984] IRLR 141 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 form 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 [1986] IRLR 194. 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 [1998] 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 [1984] IRLR 141, 144 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 Lordship's Hosue in Davies v Presbyterian Church of Wales [1986] IRLR 194, 196. 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.

Lord Hoffman who dissented at paragraph 62 and 63 put the position thus:-

"62. Nor do I think it very helpful to say, as Mummery LJ said in Diocese of Southwark v Coker [1998] 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 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. The nature of an office inevitably means that the procedures for appointment will closely resemble those attending the engagement of an employee. No doubt similar documentation could be found concerning the appointment of, among many others, judges, rent officers and superintendent registrars of births, deaths and marriages (see Miles v Wakefield Metropolitan District Council [1987] AC 539.) But that does not mean that their appointment to these offices created contractual relations.

63. I would therefore not accept, at any rate without considerable qualification and explanation, the Lord President's statement that there was a rebuttable presumption that the appointment of a minister was not intended to 'give rise to obligations enforceable in the civil law". Subject to any question of jurisdiction under the church of Scotland Act 1921, appointment to an office does give rise to obligations enforceable in civil law. So the question is not whether the appointed was intended to create legal relations but rather what legal relations it was intended to create. A ministry in the Church of Scotland is either an office recognised by law or it is not. If it is, then appointment to that office does not involve a contract of service or for services. It is, I suppose, possible that in addition to holding her office, a minister might enter into a contract of service with someone: for example, to act as chaplain to a prison or a nobleman. Miss Percy's arrangements with HM Prison, Noranside may have been of such a character. But those arrangements are not relevant to these proceedings. It is concerned with her demission of her charge and her status as minister."

23. Lord Hope in his speech sought to deal with the issue narrowly as to whether there was a contract under which the Appellant undertook personally to execute any work or labour. He set out the position thus at paragraphs 107 and 108.

"107. By invoking the proposition that it must be positively established that there was an intention to create a binding contractual relationship enforceable in civil law – that there is a presumption that there was no such an intention, in other words – the respondents are seeking to achieve the same result by another route. Miss O'Brien indicated that she wished to lead evidence from the appellant that it was her intention to enter into such a relationship. But the parties' intention when they entered into the agreement can only be established objectively, as Mummery LJ observed in Coker at p.147C – by clear indications of a contrary indication in the document, as Dillon LJ said in Parfitt at p.144. There is ample authority in Scots law too for the proposition that, as a general rule, extrinsic evidence of the parties' intention as to whether or not they intended to be bound by obligations which they have entered into writing is inadmissible: Bell, Commentaries, vol I, p.457; Stewart v Kennedy (1890) 17 R (HL) 25, per Lord Watson at p.30. The only way the presumption could have been rebutted therefore, according to this argument, would have been by including an express term in the agreement that it was intended to give rise to obligations enforceable in civil law.

180. This would, in effect, be placing the onus on the appellant to ask for the inclusion of a term in the agreement that the provisions about discrimination in the employment field in Part II of the 1975 Act were to apply to it. Since both sides would have to agree to its inclusion, the respondents would be in the position of having a veto in response to her request. This is so contrary to the approach that must be taken to the effect of contracts in the field of employment in discrimination cases that a fresh approach to the problems raised by this case seems to me to be unavoidable. In my opinion it is necessary to treat the question whether this is a case of 'employment' within the meaning of s.82(1) of the 1975 Act ('the contract issue') as a separate issue form the question whether, assuming that this is a case of 'employment' as so defined, the appellant's complaint is excluded from the jurisdiction of the civil courts because it is a matter spiritual within the meaning of article IV of the Declaratory Articles ('the jurisdiction issue').

Lord Scott set out his position at paragraphs 137;

"I wish, in particular, to express my agreement that the agreement between the appellant and the Church of Scotland Board of National Mission, whereunder in return for salary, accommodation and other benefits the appellant undertook to perform the duties of an associate minister, was an agreement which created legal obligations between the parties. If the board had withheld or reduced her salary the civil courts would surely have had jurisdiction to entertain an action for payment. If the reason for non-payment had been that she had declined to perform the duties of her office, the civil courts would have had jurisdiction to decide whether that circumstance justified the withholding of salary. The fact that her duties were duties of an office would have made no difference whatsoever (cf Miles v Wakefield Metropolitan District Council [1987] IRLR 193). It seems to me clear that the agreement was one which created a legally binding relationship between the parties to it.

And finally Baroness Hale who at paragraphs 148 and 151 said thus:-

"148. 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 [1998] 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."

"151. We were taken to three cases where clergymen had complained of unfair dismissal: President of the Methodist Conference v Parfitt [1984] IRLR 141, CA, Davies v Presbyterian Church of Wales [1986] IRLR 194, HL, and Diocese of Southwark v Coker [1998] ICR 140, CA. 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. 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, s.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."

24. How did the Tribunal Chairman approach this task in the light of these authorities? She referred firstly to Percy at paragraph 5.2:-

"Finally, a relatively new case decided in the House of Lords was considered in some detail. That case is Percy v The Church of Scotland Board of National Mission [2006] IRLR 195. In relation to the question of whether the contract, if there was one, was a contract of service, the tests which I should consider have been set out in a number of cases well known to Tribunals including Ready Mixed Concrete (South East) Ltd v Minister of Pensions [1968] 1 All ER 433. These test include such matters as the degree of control exercised by the Respondent, whether the individual can send a substitute to carry out the work, the degree of integration of the individual into the organization and whether there was mutuality of obligation. A number of factors will assist the Tribunal in considering these aspects and much will depend on the facts as fund. Generally, no one test is sufficient to clarify the status of the individual and the Tribunal will apply a mixed test considering all facts and balancing those that indicate a contract of service with those that would suggest otherwise. It is settled law that an individual can be both an office holder and an employee."

Her conclusions were set out in paragraph 7 onwards:-

"Conclusions

7. This was a difficult matter which required careful consideration of the facts and relevant case law. I start with the question of whether there was an intention to create legal relations. This is a difficult question in the employment law context where there is usually a presumption that there is such an intention. In the case of office holders and, in particular, ministers of religion, this has not hitherto been the case. So, for example looking at the case of the Methodist Conference it was said;

"That a correct appreciation of the spiritual nature of the relationship between a minister and the Methodist church show that the arrangements between the minister and the church in relation to his stationing throughout his ministry, and the spiritual discipline which the church was entitled to exercise over the minister in relation to his career, were non-contractual"

Similarly in Davis v Presbyterian Church it was considered that;

'the question of whether the applicant was employed under a contract of service was a question of law to be determined on the true construction of the church's book of rule; that under those rules, the duties of a minister were of an exclusively spiritual and non-contractual nature and, for its part, the church had no obligations in law in respect of its ministers other than the correct administration of its trust funds and property providing for their house and stipends".

In the Birmingham Mosque case it was similarly held that the first question is whether there is any contract at all. The Diocese of Southwark case is slightly different in that there was no legal person with whom a contract could be concluded. There is no such difficulty in this case as the Respondent is indeed a legal entity. As Mr Sendall correctly points out, all those cases came to the conclusion that those minister of religion, for slightly different reasons, could not be considered to be employees.

7.1 I therefore turn to the case of Percy and have read it with care. That case is concerned with the appellant's status for the purposes of a claim under Sex Discrimination Act 1975. Mr Sendall reminded me that there was not an issue in that case with respect to the definition contained within Section 230 ERA. Indeed, it is recorded that the appellant accepted that she did not enter into a contract of service. However, what is discussed in that case which is relevant to my considerations is the question of the intention to create legal relations. As Lord Nicholls said. 'The context in which these issues normally arise for statutory protection for employees. Given this context, in my view it is time to recognize 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" Lord Hoffman in a dissenting judgment accepted that there was an intention to create legal relations, "but those legal relations were not a contract of employment". In Lord Hope's judgment the concession by Miss Percy that she did not fall within the definition under the Employment Rights Act is also recorded. What Baroness Hale says in her judgment is this: "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 and to the Lord President in this case, / have difficulty in understanding why there should be any presumption against such an intention." That is the point at which Mr Barnettt says that the previous case law is overruled. She repeats that later in her judgment and continues, "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 our bodily needs, and of the judges appointed to administer the law, in this respect".

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 organization 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 dependant in part of funds raided through his own 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."

25. Mr Sendall first submitted that it was not easy to determine from the Chairman's conclusions, as to whether she did rely on the Percy decision and/or considered it to be binding upon her. We do not agree; it seems to us that the Chairman did not proceed on the basis that there was a presumption against the intention to enter into legal relations, but dealt with the matter firstly by attempting to determine whether there was any legal agreement between the parties and if so whether it amounted to a contract of service, clearly following the guidance from Lord Nicholls and Baroness Hale.
26. Mr Sendall then submitted that the Percy case should have been regarded as of no importance at all to the issues that this Tribunal had to decide. He submitted that the Percy case, in the House of Lords, was only concerned with the existence of a contract personally to undertake work for the purposes of the Sex Discrimination Act 1975 and not with the contract of service. Secondly he argued that the House of Lords did not overrule, whether explicitly or implicitly any of the previous authorities, set out above and particularly the previous House of Lords decision in Davies. He submitted that any comments by the House of Lords on matters outside the issue under the Sex Discrimination Act were of no binding effect.
27. It seems to us the House of Lords in Percy particularly in the speeches of Lord Nicholls and Baroness Hole, have reversed the traditional thinking on the issue as to whether the parties to a contract as a minister of religion did intend to be legally bound in two very important respects. Firstly, that they have cast considerable doubt upon, if not reversed the old presumption, that a minister and a church do not intend to enter into legal relations; and secondly that an individual can be an employee as well as an office holder and thus the task is to determine whether a contract existed at all and if so whether it was a contract of employment, disregarding any presumption against an intention to enter into legal relations. It seems to us that the House of Lords have clearly stated that if the relationship between church and minister has many of the characteristics of a contract of employment in terms of rights and obligations, these cannot be ignored simply because the duties are of a religious or pastoral nature. The precise nature of the legal relationship we will explore below.
28. Most of the remaining grounds are attacks by Mr Sendall upon the Tribunal's whole decision for failing to distinguish properly between the various offices held by the Respondent within the church and the basis upon which they were held. He argued that the Respondent's case in his ET1 was entirely connected with his position as Bishop/Minister, whereas the decision appeared to be based upon his pastorate and the Tribunal failed to identify and analyse the crucial difference between the two, particularly in light of the fact that the offices of Bishop/Minister he continued to hold not withstanding the termination of his office as pastor at the Harrow Church. We do not agree with this view. Whilst at times both the ET1, the ET3 and indeed the decision have used the terms Minister/Bishop/Pastor on an interchangeable basis, it is clear that the parties understood this claim to be about the removal of the Respondent as pastor of Harrow Church. The ET1 taken as a whole, clearly referred to that removal (see in particular paragraph 10) and the response in the ET3, clearly dealt with his removal as pastor with the contention that his role as pastor was of a spiritual nature and therefore he was not entitled to bring a claim for unfair dismissal. Significantly, the first paragraph of the decision refers to the Respondent having submitted a claim "for unfair dismissal arising out of the termination of his pastorhood on 15 June 2005".
29. Ground 2 argued that the Tribunal erred in law by implicitly concluding that there was mutuality of obligation between the parties sufficient to support a contract of employment, despite the finding that the Appellants had acknowledged not to be under any obligation to pay the Respondent, in the event that insufficient funds were received by them. Mr Barnett answered this ground firstly, by pointing out that there was an obligation to pay on the funds that they received from the church. Secondly, that even if there were insufficient funds the Appellants would give one month's grace. Thirdly, he compared the situation to that with bonus payments, where an employer can be contractually obliged to pay a bonus only if the predetermined turnover or profit target is achieved. We agree with Mr Barnett, and are satisfied that there was sufficient mutuality in the financial arrangements that were made for the payment to the Respondent.
30. Under ground 3, the Appellant pointed to the error in paragraph 7.3 of the decision, which referred to the fact that "his salary was dependent in part, on funds raised through his own local church" whereas the facts are that apart from the one month's grace, his salary was totally dependent on the monies received. There was clearly error in that conclusion by the Tribunal, but equally, we do not find that it affected their overall view of the case. In Ground 4, the Appellant complained that the Tribunal erred by failing to distinguish between the duties owed by the Respondent as a Bishop/Minister and those owed as a pastor. Mr Sendall spent some time taking us through the church minutes, which set out in detail the duties of ministers and/or bishops, each duty being explained by a reference from the holy scriptures. He argued that the role of the Respondent in the Harrow Church merely arose from his duties as a Minister/Bishop under the churches minutes. His duties arose from his spiritual accreditation and that the Tribunal had failed to find any additional obligations which might reflect the intention to enter into legal relations. He argued that the obligation to send in monthly reporting forms was an obligation that arose from his duty as a minister and not a pastor. Mr Sendall argued that by becoming a pastor, the Respondent had merely taken on a further role within the church, which was not intended to alter fundamentally his status or relationship with the church.
31. We cannot agree with this view; it was common ground between the parties that the Respondent was a pastor and it is those obligations which the Tribunal considered and recorded. In our view, the Tribunal rightly concentrated on the legal framework which caused him originally to be paid through head office, the arrangements concerning the collection of monies which clearly involved the Respondent and the other reportings he had to carry out. A particular complaint is made about a sentence in paragraph 7.3 where the Tribunal said thus "I am also satisfied that ministers were central to the running of the organisation and therefore integrated well into it", the context of this sentence makes it almost certain that this was a dictation error and should have referred to pastors rather than ministers.
32. Ground 6 alleged that the Tribunal failed to make sufficient relevant findings as to the principal terms of the agreement, it found to be contractual, and in particular it failed to identify the obligations imposed upon the Appellant. We cannot agree; the Tribunal's decision, particularly paragraph 7, makes it clear that there were obligations on the Respondent in terms of the administrative functions that he was expected to perform, particularly in terms of the forms and other administrative matters that he had to control; paragraph 4.8 also made reference to the collection of the monthly mortgage payments. We agree with Mr Barnett's submissions that at this stage in the case, the Tribunal was only to decide whether the necessary constituents of a contract of employment existed. It was not a substantive hearing for declarations to the terms and conditions of his employment.
33. Ground 7 appears to repeat previous points in a different light, complaining that the Tribunal's decision was perverse by concluding that the Respondent's spiritual duties were consistent with contractual obligations. Again, we cannot agree with this submission. As we pointed out above, the Chairman made findings that the Respondent exercised administrative functions on behalf of the church in addition to his spiritual duties in his congregation. The combination of the two gave rise to the legal relationship.
34. Ground 8 refers to two findings which the Appellants contended conflict with the Tribunal's decision that there was a contract of employment. Firstly, that the ultimate responsibility for disciplining the Respondent rested with the church in America; and secondly, that there was no obligation on the Appellant to pay the Respondent for his work. As regards the latter point, we have commented above, that it appears that, for so long as the church was in funds from the local church, there was indeed an obligation to pay. As regards to the issue discipline, we have some difficulty in understanding Mr Sendall's point, since it appears that the American Church's involvement has only in relation to the Appellant's spiritual qualification. The discipline in respect of the role of pastor was carried out by the UK church, hence the complaint of unfair dismissal.
35. In ground 9, the Appellant complained about the sentence at the end of paragraph 7.2 of the Tribunal's decision: "I accept that there was an intention to create legal relations though the precise nature of those relations might not have been clear to all at the time of the agreement". This followed a passage which refers to the Appellant's ability to regulate and discipline its ministers. Mr Sendall argued that it is not clear why the ability to discipline the Respondent in respect of his conduct was more consistent with employment than with the mere holding of an office, since the minutes make it perfectly clear that the disciplinary provisions were treated as being ecclesiastical rather than civil. He also criticised the Tribunal for being able to conclude that there was an intention to create legal relations without being able to clarify what the precise nature of those relations were.
36. Mr Barnett found no difficulty with the Tribunal's conclusion since he submitted they were only required to decide whether both parties intended to be bound by the relationship and for any disputes about the precise nature of their obligations to be thereafter resolved by litigation. He argued that the Tribunal was correct in concluding that issues of regulation and discipline were clear examples of these parties intending to enter into legal relations. Again we are satisfied the Tribunal was entitled to conclude that matters had preceded beyond the mere spiritual level of a minister as defined in the minutes of the church and that there was a far more formal connection between them which amounted to a legal agreement.
37. Having considered carefully all the matters raised by Mr Sendall, in his excellent written submissions as amplified at the hearing, we can find no grounds to interfere with the Chairman's decision and this appeal is dismissed.