The Collapse of Enterprise Insurance Company PLC: Directors’ Duties
Author: Daniel Benyunes
Enterprise Insurance Company PLC v Andrew Flowers, 2023/GSC/00
In a recent Judgment, Mr John Restano KC, a Puisne Judge of the Supreme Court of Gibraltar, found the “main protagonist” of the collapsed Enterprise Insurance Company PLC (in liquidation) liable for a claim for damages mounted by its liquidator.
Although damages are still to be assessed, the original claim was put at $50,000,000 from which will have to be deducted substantial amounts which had been collected during the liquidation which started with a provisional order made in July 2016.
The 379-page Judgment delved deep into the affairs of the ill-fated insurer and provides an interesting record and analysis of insurance law and practise in Gibraltar and the work of the Gibraltar Financial Services Commission (GFSC).
Coming soon after the UK Supreme Court Judgment of BTI 2014 LLC v. Sequana S.A. [2022] UKSC 25 relating to trigger points at which directors must have regard to the interest of creditors, the Enterprise Judgment provides a helpful factual analysis which will no doubt be referred to in future cases and should certainly inform company directors, whether in executive positions or holding Non-Executive Directorships (NEDs), of what to look out for in the conduct of their obligations.
In summary, the Supreme Court of Gibraltar restated the proposition that the “creditors’ interests duty” arises when the directors know, or ought to know, that the company is insolvent, or bordering on insolvency, or insolvency is probable.
This of course very much requires a fact-based analysis of the kind that Mr Justice Restano conducted. Although a balance has to be struck with the interests of other stakeholders, including shareholders, once insolvency is inevitable (or as the Court found in this case was established following cross examination of experts), creditors’ interests are paramount and the acts of directors cannot be ratified by shareholders.
The case also provides a useful example of the weighing up of how the evidence of competing experts in actuarial, insurance and insolvency matters is dealt with.
Among the other legal principles considered in the Enterprise case was the courts’ entitlement to reach adverse inferences with regard to matters which could have been put to witnesses who did not give evidence at trial.
As at the date of this article, it is unknown whether the defendant Mr Andrew Flowers will be appealing the Judgment.
Charles Gomez & Co’s Principal Barrister Charles Gomez and Barrister Daniel Benyunes represented two of the defendants, against whom proceedings were discontinued before trial.