One of the two Catholic adoption agencies which launched a legal challenge over gay adoption has withdrawn its case.

Father Hudson’s Society, based in the Midlands, had launched a joint appeal in December with Catholic Care after the Charity Commission ruled they could not take advantage of legislation allowing them to exclude gay people from adopting.

The agencies had hoped to change their charitable objects in order to take advantage of a clause in equality legislation which would permit them to discriminate against people with certain sexual orientations.

The discrimination clause is applicable if charities are permitted to do so by their governing documents.

The society withdrew its case at a hearing earlier this month although Catholic Care is continuing with its appeal, Third Sector Online reports.

Neither charity have commented on the latest development.

In January, it was reported that 50 per cent of the Catholic adoption agencies that threatened to close if forced to work with gay couples have adopted the new equality laws.

Eleven agencies were given a 21-month exemption period from the Equality Act in April 2007, which forbade discrimination in the provision of good and services on the grounds of sexuality.

The exemption period ran out at the start of the new year.