Lenlyn UK Ltd v Kular

Constructive dismissal is determined by the contractual test. Where the alleged breach is of trust and confidence, the question is objectively whether the employer acted without reasonable and proper cause in a manner likely seriously to damage that relationship; it is not a range-of-reasonable-responses test.

An employer may have proper cause to investigate serious losses, yet breach the implied term through the way it conducts a proposed exit and disciplinary process. A material misstatement which makes disciplinary proceedings appear pre-judged may entitle the employee to resign.

When assessing a Polkey reduction, a tribunal must assess the chance that this employer would have dismissed fairly. It must also avoid double-counting the same conduct when considering contributory fault.

The claimant, a long-serving financial controller, resigned after the employer discovered a loss of £1.9 million connected with a cash-collection contractor. Following an external accountant's report, the employer offered a settlement agreement and stated that the accountant had found him grossly negligent. The Employment Tribunal held by a majority that he had been constructively and unfairly dismissed.

The employer appealed that finding. The claimant cross-appealed the Tribunal's 75% Polkey deduction and its 30% deduction for contributory fault. The central issues were whether the employer's conduct on 16 December 2014 repudiated the contract, and whether the deductions had been assessed on the correct basis.

1. Appeal dismissed; cross-appeal allowed in part. The Employment Tribunal had correctly applied the contractual test for constructive dismissal under section 95(1) of the Employment Rights Act 1996. Its reasoning showed that it had considered whether the employer's acts, separately and cumulatively, amounted to a fundamental breach of contract.

2. The employer had reasonable and proper cause to investigate the serious loss and to commission and consider the accountant's report. That did not answer the distinct question whether its conduct on 16 December 2014 had reasonable and proper cause.

3. The Tribunal was entitled objectively to find a repudiatory breach in the circumstances of the protected conversation. The employer wrongly represented that the independent accountant had found the claimant guilty of gross negligence, sent him home until further notice, and blocked his access to the organisation. Those matters could make the disciplinary outcome appear pre-judged and participation futile. The Tribunal did not treat non-disclosure of the report as an independent duty to disclose it; rather, the claimant was entitled to take the employer's assertion about the report at face value.

4. On the Polkey issue, the Tribunal had to assess the prospect that this employer would have dismissed the claimant fairly, taking account of all its findings about the employer's conduct. Its references to a fair disciplinary process suggested that it may instead have assumed a fair process. That issue was remitted.

5. The factors used for the Polkey assessment significantly overlapped with those used to assess contributory fault. The Tribunal had to consider expressly whether a further deduction was just and equitable and, if so, its amount, to avoid penalising the claimant twice for the same conduct. That issue was also remitted, after reconsideration of Polkey.

6. The Judge added, obiter, that on the reasoning in Malik v BCCI SA [1997] ICR 606, a knowing material misrepresentation to an employee was strongly arguable to be a breach of trust and confidence even if the employee learned of it only after employment ended.

• Employment Appeal Tribunal: employer's appeal dismissed; claimant's cross-appeal allowed on the Polkey and contributory-fault issues, which were remitted to the Employment Tribunal.
• Employment Tribunal, London Central: by a majority, held that the claimant had been constructively and unfairly dismissed; made a 75% Polkey deduction and a 30% deduction for contributory fault.