The dispute in Lenlyn UK Ltd v Kular started when the company, which runs retail foreign exchange bureaux, found that £1.9m cash had disappeared over a six month period, as a result of fraud by a newly appointed contractor responsible for collecting cash from the retail outlets. The money was irrecoverable as the contractor had gone into administration. The claimant was the financial controller at the time. A report commissioned from an external forensic accountant concluded that, although there was no internal dishonesty, the claimant's conduct in failing to monitor the contractor "could be considered negligent" and recommended that the employer "consider the need for a full disciplinary investigation" into the claimant's apparent lack of care.

The employer decided that, instead of starting disciplinary proceedings, they would to make the claimant an offer by way of a "protected conversation" – under section 111A of the Employment Rights Act 1996, evidence of pre-termination negotiations is inadmissible in "ordinary" unfair dismissal claims, unless there has been "improper behaviour".

The claimant was called in to a meeting with the HR manager at the end of the working day on 16 December. The claimant was told that the forensic accountant's view was that he had been "grossly negligent"; the employer was considering taking disciplinary action against him; no decision had been made, but the employer wanted to make him a "without prejudice" offer to leave. The manager gave him an envelope she said contained a settlement agreement and told to think about it and let her know by Monday (22 December) if he was interested. He was not required to come to work in the meantime.

When he got home the claimant remembered that he had forgotten to set an out-of-office reply. He tried to do that remotely, and discovered that he had been cut off from access to his employer's system. He did not accept the offer but instead resigned on 22 December. His claim of constructive unfair dismissal was upheld at the Employment Tribunal. The Tribunal decided that details of the 16 December meeting were admissible because the impropriety exception applied. The claimant had not been given reasonable time to consider the settlement offer and, in addition, the accountant's report had been misrepresented to the claimant – it had said that there needed to be an investigation, not that the claimant had been "grossly negligent".

The EAT dismissed the employer's appeal. The Tribunal was entitled to reach the conclusion that the employer's conduct on 16 December in pre-judging the issue showed that it no longer intended to be bound by the employment contract – a breach of its duty of trust and confidence, entitling the claimant to resign. The EAT added that it thought that the employer's misrepresentation of the accountant's report to the claimant was also, in itself, a breach of the trust and confidence duty.

The facts of this case are a classic example of what was envisaged as improper conduct in the ACAS Code of Practice on settlement agreements – putting undue pressure on an employee by not giving reasonable time for consideration of a settlement offer. The claimant was given less than a week to accept the offer with no indication that the short time limit could be extended.