Percy vs Church of Scotland Board of National Mission

A note by Professor David McClean

Introduction

1.    This important decision of the House of Lords has caused some confusion, partly because The Times (and maybe other papers) hailed it as establishing that the clergy were employees. And indeed a letter later appeared welcoming just that. It does nothing of the sort, at least not in the way some seem to have supposed.

Background to the case

2.    Ms Percy held an appointment as an associate minister in a group of parishes in the Church of Scotland presbytery of Angus. She was persuaded to resign after allegations that she was having an affair with a married elder from one of the parishes. She later began proceedings in an industrial [now, employment] tribunal claiming unfair dismissal and sex discrimination. The sex discrimination argument was that male ministers faced with corresponding allegations were not disciplined in the same way. The facts are still, some 8 years on, untried: the case has been working its way through the courts on a preliminary point of law.

Identifying the issues

3.    It is important to see first what was not in issue. The original tribunal held that Ms Percy was not within the scope of either the unfair dismissal or the sex discrimination legislation. The unfair dismissal claim required (in the absence of some special statutory rule) proof of the existence of employment, of a contract of service, and the tribunal held that there was none. Ms Percy at no stage challenged that decision. The House of Lords expressly noted (per Lord Nicholls of Birkenhead at paras 12 and 13) that the existence of a contract of service was not in issue. Lord Hope of Craighead referred to a Scottish case in which it was held that assistant ministers were not employed under a contract of service, and repeatedly noted that that decision was not challenged by counsel in the appeal (see paras 87, 88 and 101). So whatever the House of Lords decided, it did not decide that ministers of religion were employed under a contract of service.

4.    The second limb of Ms Percy’s original claim was based on section 82(1) of the Sex Discrimination Act 1975. This does not require employment (a contract of service) and can be invoked by someone working under a contract for work and labour. It speaks of ‘a contract of service or apprenticeship or a contract personally to execute any work or labour’. The tribunal held that no such contract existed. The appeal tribunal agreed, albeit ‘with some hesitation’. The Court of Session also agreed, primarily because any contract requires an intention by the parties to create binding legal obligations (as opposed, for example, to a ‘gentleman’s agreement’); the Lord President thought there where spiritual duties were involved there was a presumption against there being any such intention. Lord Hope of Craighead was very critical of the ‘presumption’ argument, which is effectively demolished (see paras 106-108). The House of Lords, Lord Hoffman dissenting, overruled the lower courts on this point, for reasons explored further below.

5.    There is another strand in the case which is of great importance to the Church of Scotland. Under the ‘declaratory articles’ in the Church of Scotland Act 1921, the church enjoys autonomy, exemption from the jurisdiction of the courts, in ‘matters spiritual’. Reversing the lower courts, the House of Lords held that the facts of Ms Percy’s case came outside that exemption. That issue has no relevance to the Church of England.

Contracts and office-holders

6.    Although not an issue in the appeal, the House of Lords considered the long list of cases which have established that clergy and ministers of religion generally do not work under a contract of service. Several passages in the opinions of the Law Lords were critical of strands in the reasoning in some of those cases.

7.    The distinction between employees and office-holders was examined by Lord Nicholls. He pointed out that the unfair dismissal legislation had made the distinction much more important, given that only employees could benefit from the new legal protection. It was not a clear-cut distinction: some people holding office in large organisations (the vice-president of a company, for example) would also have employment contracts. But he did say this (at para 19):

Sometimes the existence of an office is clear. An office may be of ancient common law origin, such as the office of constable. Indeed some offices were regarded by the common law as incorporeal hereditaments belonging to the current office-holder. A benefice in the Church of England is regarded as a freehold office belonging to the incumbent for the time being.

8.    Although strictly obiter (not necessary for the decision in the case) this  provides modern authority for a central proposition in the Review Group’s reports.

9.    What emerges in Lord Nicholl’s opinion is a proposition that an office-holder may also work under a contract, but he cites earlier authority (Slynn J in Barthorpe v Exeter DBF, 1979; a case about a stipendiary reader) for the idea that the contract might be one for services and not an employment contract (one of service).

10.  Lord Hoffman reaches similar conclusions in more forthright language. The distinction between office-holders and employees was ‘well-established and understood’ (para 54). The proposition that a minister of a church was an office-holder and not an employee ‘has been stated so often and for so long that I would have not have thought that it was open to question’ (at para 56).

An intention to create legal relations

11.  The absence of an intention to create binding legal obligations was an important strand in Mummery LJ’s judgment in Diocese of Southwark v Coker (1998). Lord Nicholls has this to say (at paras 24 and 24):

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. … But this principle cannot 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.

12.  Lord Nicholls recognises that the Church of England, its dioceses and the Church of Scotland are not entities capable of being sued. But, he says rather delphically, the ‘internal fragmentation’ of powers and duties within churches ‘ought not to stand in the way of otherwise well-founded claims’ (at para 28). Lord Hope declared the Church of Scotland to be a ‘voluntary association’ (at para 117), capable of acting only through particular bodies or individuals; the contract was with the Board of National Mission, not the Church as a whole.

13.  Lord Hoffman thought that it was unanswerably the case that the documents used in Ms Percy’s case showed 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’ (at para 62). If it had not been a ministerial office, there would plainly have been a contract of employment (at para 66). Lord Scott of Foscote in his short concurring judgment expressly agrees that there was an intention to create legal relations.

The Sex Discrimination Act point

14.  Lord Nicholls’ opinion is not entirely clear on this matter. He holds that there was a contract of employment within section 82(1) of the 1975 Act; it was not necessary to distinguish in that context between a contract of service and one for services, as both were within the section (see paras 33 and 36). Lord Hope agrees in the result, that the case falls within section 82(1), but he seems to emphasise the language about the personal exercise of work or labour (at paras 113-114). Baroness Hale of Richmond  agrees with Lord Nicholls that the case falls within the ‘wider’ definition of employment in section 82 (see paras 140 and 142). Lord Hoffman was of the view that as there was no contract at all, because of the high significance he gives to office-holding, and that Ms Percy was not a ‘worker’ under the Equal Treatment Directive to which the 1975 Act gave effect. He recognises that the amended version of the Directive, speaking of ‘employment and occupation’ altered matters, but not at a date relevant to her case.

So, where does that leave us?

15.  I think the position is as follows:

(i)    The assertion we have made about the nature of the freehold and its             relationship to property concepts is supported.
(ii)   The Law Lords all recognise that (at least some) clergy are office-holders.
(iii)   There was no challenge to the proposition that clergy office-holders do not work under a contract of service (an employment contract as that term is used in most legal contexts).
(iv)  All Law Lords but Lord Hoffman held that an office-holder can work under a contract, whether of employment or for work and services, as that term is used in the particular context of the 1975 Act. But as Lord Hoffman sets out the law has moved on, and the point has really lost its relevance given that clergy engage in an ‘occupation’.
(v)  The Terms of Service Regulations we are producing would clearly point to an intention to create legal relations. Although that issue was relied on in some of the cases which established the ‘office-holder and not employee’ principle, the Percy case seems to re-affirm the principle in the law outside the particular anti-discrimination context.
(vi) We are of course content that unfair dismissal claims should be available to the clergy, notwithstanding their office-holder status.