In a ruling published today after a High Court hearing earlier this month, Mr Justice Briggs concluded that the tribunal's decision was flawed and referred the matter back to the Charity Commission for further consideration.
Catholic Care wanted to take advantage of a section of the Equality Act (Sexual Orientation) Regulations 2007 that allows charities to discriminate on the grounds of sexual orientation if it is stipulated in their constitutions. But in November 2008 the commission refused to let it change its objects accordingly, prompting an appeal to the tribunal.
Briggs noted that both the commission and the tribunal had not regarded it as legally necessary to consider whether the public benefit of finding adoptive parents for hard-to-place children outweighed the public disbenefit of discrimination.
Briggs concluded that the tribunal was wrong to rule that the exemption in the equality regulations applied only in cases of "purely private" charitable activity where no public funding was involved.
He also rejected the commission's argument that it applied only to cases where children, as the charity's principal beneficiaries, were being discrimated against, such as in a charity that only offered counselling to homosexual teenagers. He said this interpretation was "neither logical, rational, purposive nor responsive to any reasonable linguistic interpretation of the language used".
He said it was therefore necessary for the balance of benefits and disbenefits of the continuation of Catholic Care's adoption service to be considered. Under the terms of the Human Rights Act there must be what he called "clear and weighty reasons" for discrimination.
But he said the issue was difficult and ruled that the Charity Commission was in a better position than the court to decide it. He emphasised that the commission should do so as quickly as possible because Catholic Care was currently keeping on its staff even though it was not getting any new adoption cases to deal with.
The charity's solicitor, Benjamin James of Bircham Dyson Bell, said the commission had promised that the matter would be settled at its May board meeting. He said he was pleased the judgement had "recognised the issues".
He said the charity tribunal had been in a difficult position because it was not expert in human rights law. "The complexity of this case meant it needed a very experienced judge," James said. "It is unfortunate that it was the first case for the charity tribunal and you can't criticise it for not working its way through the human rights law."
Briggs noted that the tribunal's preliminary ruling "does not lend itself to concise summary, nor is it entirely easy to understand".
A spokeswoman for the commission noted the ruling but said she was unable to comment further.