The Christian owners of a guesthouse who refused to allow a gay couple to stay in a double-bedded room have lost an appeal over a decision that they discriminated against the two men.

Three Court of Appeal judges dismissed a challenge brought by Peter and Hazelmary Bull, who run Chymorvah House in Marazion, Cornwall, against a ruling that they breached equality legislation when they turned away Martyn Hall and his civil partner Steven Preddy in September 2008.

In a case described by one of the judges as being of general importance, the court upheld the finding of Judge Andrew Rutherford at Bristol County Court in January last year that the Bulls had directly discriminated against the couple - who were awarded a total of £3,600 damages.

Mr Bull, 72, and Mrs Bull, who is in her late 60s, regard any sex outside marriage as a "sin". They denied either direct or indirect discrimination. They argued that their policy of restricting double beds to married couples, in accordance with their religious beliefs, was not directed to sexual orientation, but sexual practice.

But, dismissing their appeal, Sir Andrew Morritt, Chancellor of the High Court, sitting in London with Lord Justice Hooper and Lady Justice Rafferty, said: "The judge 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."

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."

Simon Calvert, of the Christian Institute, which funded Mr and Mrs Bull's appeal, said: "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."