On Monday 13th March 2023 the Supreme Court of Gibraltar discharged the Administration Order over Prometheus Insurance Company Limited and placed it into liquidation. The application was brought by the Administrator Freddie White of Grant Thornton Gibraltar, (who was appointed as liquidator), represented by ISOLAS LLP Partner James Montado. This represents the first instance in which an insolvent insurance company has transitioned from administration into liquidation.
The Judgment is particularly important as the Court approved directions as to the treatment of insurance creditors upon the transition to liquidation and the crediting of amounts paid to them during the preceding administration.
Under the Insolvency Act 2011, ‘quantification’ of claims is to take effect in the case of a liquidation preceded by an administration as at the date of the administration order. However, it was unclear if by quantifying a claim at the commencement of the administration, payments made during the administration would be carried over and credited in the liquidation. If this were not the case, it would clearly give rise to a disparity between creditors within the same class (against the statutory principles) as those insurance creditors who had their claims admitted during the administration as they would be entitled to a greater share of the assets than those whose claims were only admitted in the liquidation.
The position advanced on behalf of the liquidator (and ultimately accepted by the court) was that assets received during the administration should be treated as part of the distribution of assets declared during the liquidation and credits applied accordingly until the amounts of the distribution declared in the liquidation exceed the amount paid in the administration.
In reaching its conclusion the Court acknowledged that the liquidator’s proposed directions were consistent with the statutory regime. This was also the fairest way to deal with insurance creditors as it would be unjust if insurance claims which had been admitted during the course of the administration were to receive a greater return than those admitted later on in the liquidation.
ISOLAS LLP Partner James Montado is recognised as one of the ‘go to’ lawyers for insolvency and bankruptcy matters. James has been involved in the majority of insurance company insolvencies in Gibraltar in various capacities whether acting for the liquidator/ administrator or advising directors, creditors, and foreign compensation schemes. He also advises on matters prior to the onset of insolvency including advising directors on their duties, responsibilities, and potential liability as well as reviewable transactions.