Two Christian guesthouse owners who were ordered to pay damages after refusing to allow a gay couple to stay in a double room lost their appeal today.
The challenge by Peter and Hazelmary Bull, who run Chymorvah House in Marazion, Cornwall, was rejected by three judges in the Court of Appeal in London.
They had appealed against a conclusion by a judge at Bristol County Court that they acted unlawfully when they turned away Martyn Hall and his civil partner Steven Preddy in September 2008.
Judge Andrew Rutherford ruled in January last year that the Bulls had breached equality legislation and ordered them to pay the couple a total of £3,600 damages.
The appeal judges heard that the Bulls thought any sex outside marriage was a "sin", but denied they had discriminated against Mr Hall and Mr Preddy, from Bristol.
Today's ruling was given by Sir Andrew Morritt, Chancellor of the High Court, Lord Justice Hooper and Lady Justice Rafferty.
Mr Bull, 72, and Mrs Bull, who is in her late 60s, were not in court for the announcement.
During the hearing of the appeal in November, James Dingemans QC, for the Bulls, argued that the couple were entitled to hold "outdated" religious beliefs.
He said the Bulls operated a policy directed towards sexual practice not sexual orientation and said they believed that permitting unmarried people - whether heterosexual or homosexual - to share a double bed involved them in "promoting a sin".
Mr Dingemans said the Bulls were not trying to undermine the rights of Mr Hall and Mr Preddy and judges had to carefully balance all human rights involved.
Robin Allen QC, for Mr Hall and Mr Preddy, argued that his clients had a "lawful civil partnership" and the guesthouse should have been "open" to them in the same way it was to heterosexual married couples.
The judges heard that the Bulls were being backed by the Christian Institute and Mr Hall and Mr Preddy by the Equality and Human Rights Commission.
After the ruling, John Wadham, the Commission's group legal director, said: "I have genuine sympathy for Mr and Mrs Bull, as their beliefs are clearly strongly held.
"We believe that this case will help people to better understand the law around freedom of religion.
"When offering a service, people cannot use their beliefs - religious or otherwise - to discriminate against others.
"As the discrimination ruling has been upheld, Mr Preddy and Mr Hall are entitled to the compensation ordered by the county court. However, the Commission has no intention of enforcing its entitlement to legal costs."
Simon Calvert, of the the Christian Institute, which funded Mr and Mrs Bull's appeal, said: "Peter and Hazelmary have been penalised for their beliefs about marriage.
"Not everyone will agree with Peter and Hazelmary's beliefs, but a lot of people will think it is shame that the law doesn't let them live and work according to their own values under their own roof.
"Something has gone badly wrong with our equality laws when good, decent people like Peter and Hazelmary are penalised but extremist hate preachers are protected."
The three judges upheld the finding of Judge Rutherford that the Bulls had directly discriminated against Mr Hall and Mr Preddy in a case Sir Andrew described as being of importance to the parties "and generally".
The Bulls denied discrimination, either directly or indirectly.
Lady Justice Rafferty said that for many years the couple operated a policy of restricting the provision of double beds to married couples.
The Bulls argued that "since the restriction engages sexual practice not sexual orientation, as applied it affects those of any sexual orientation and practice who are not married".
Lady Justice Rafferty said a homosexual couple "cannot comply with the restriction because each party is of the same sex and therefore cannot marry".
She said: "The criterion at the heart of the restriction, that the couple should be married, is necessarily linked to the characteristic of an heterosexual orientation."
The judge pointed out that Mr Hall and Mr Preddy "were at pains throughout to acknowledge that the appellants' principled stand was intended to bear witness to their interpretation of Christianity".
Argument on both sides "recognised that co-existence in society requires mutual acceptance of differing views and standards and each side readily bowed to the strongly held views of the other".
The judge concluded that the extent to which the Equality Act (Sexual Orientation) Regulations 2007 limited the manifestation of the Bulls' religious beliefs, "the limitations are necessary in a democratic society for the protection of the rights and freedoms of others".
She said: "Whilst the appellants' beliefs about sexual practice may not find the acceptance that once they did, nevertheless a democratic society must ensure that their espousal and expression remain open to those who hold them.
"It would be unfortunate to replace legal oppression of one community (homosexual couples) with legal oppression of another (those sharing the appellants' beliefs); rather there should be achieved respect for the broad protection granted to religious freedom ..."
Any interference with religious rights must satisfy the test of "anxious scrutiny".
She added: "However, in a pluralist society it is inevitable that from time to time, as here, views, beliefs and rights of some are not compatible with those of others.
"As I have made plain, I do not consider that the appellants face any difficulty in manifesting their religious beliefs, they are merely prohibited from so doing in the commercial context they have chosen."
Sir Andrew said: "The judge (county court) concluded that the restriction constituted discrimination and was on the grounds of sexual orientation.
"Mr and Mrs Bull contend that this conclusion is wrong because they apply the restriction to persons of heterosexual and homosexual orientation alike if they are not married. But ... that cannot, in my view, be a sufficient answer.
"The former may be married but the latter cannot be. It follows that the restriction is absolute in relation to homosexuals but not in relation to heterosexuals.
"In those circumstances it must constitute discrimination on grounds of sexual orientation. Such discrimination is direct."
Andrea Minichiello Williams, CEO of Christian Concern, said: "This was the wrong decision. A number of judgments have now elevated sexual orientation rights above historic freedom of belief.
"This was never the intention of Parliament, and has no democratic mandate.
"Bed and breakfast owners have now become another category of people in the UK who will be penalised if they try to serve the public without compromising their religious beliefs.
"We are heading towards a two-tier society where only those who subscribe to this new state morality will be able to operate in the public sphere.
"With full homosexual marriage now on the horizon, protecting conscience will become more important than ever."