Whether a Company Under Receivership can Appoint Legal Counsel in an Action Challenging the Validity of the Appointment of a Receiver/Manager

CASE TITLE: NECONDE ENERGY LTD v. FBNQUEST MERCHANT BANK LTD & ORS (2026) LPELR-83567(SC)

JUDGMENT DATE: 10TH APRIL, 2026

PRACTICE AREA: COMPANY LAW

LEAD JUDGMENT: MOHAMMED BABA IDRIS, J.S.C.

SUMMARY OF JUDGMENT:

INTRODUCTION:

This appeal borders on Company Law.

FACTS:

This appeal is against the decision of the Court of Appeal, Lagos Judicial Division, delivered on the 23rd day of January, 2026.

The 3rd Respondent is indebted to a consortium of banks in separate bilateral transactions coalesced under a Common Terms Agreement. The Appellant, as security for the said debts, charged its interest in an oil well, together with its assets pursuant to a Deed of Charge. The 2nd Respondent was empowered to recover the said indebtedness either directly or through a receiver manager. The 4th and 5th Respondents further guaranteed the 3rd Respondent’s payment of the said debts and for that purpose, pledged their assets as collaterals.

Pursuant to an alleged default, the 2nd Respondent appointed a Receiver/manager. Proceedings were instituted before the trial Court by the 1st and 2nd Respondents herein against the appellant, and 3rd to 5th Respondents as defendants. A decision of the trial Court on 20-11-2025 that an ex parte mareva order against the Appellant and 3rd to 5th Respondents had lapsed after 14 days in the absence of a subsisting order on notice caused the 1st and 2nd Respondents to appeal to the Court of Appeal.

In the appeal, learned counsel appointed by the Receiver/manager to prosecute the case of the Appellant and 3rd to 5th Respondents filed an application seeking the disqualification of other learned Counsel appointed by the Appellant and 3rd to 5th Respondents to represent them in the suit brought against them by the 1st and 2nd Respondents, contending that only the Receiver/manager possesses the legal authority to appoint legal practitioners to represent the Appellant and the 3rd to 5th Respondents in the case. The Court of Appeal granted the application, holding that upon the appointment of the Receiver/manager, the company and its management had no power to appoint counsel to represent it in the said suit, and disqualified the legal practitioners appointed by the appellant and the 3rd to 5th Respondents.

Dissatisfied, the Appellant appealed to the Supreme Court.

ISSUE(S) FOR DETERMINATION:

In determination of the appeal, the Court considered a sole issue, thus:

Whether, having regard to the nature of the claims before the trial Court, the Court of Appeal was right in holding that only the Receiver/manager possesses the legal authority to appoint counsel to represent the Appellant, to the exclusion of the Appellant acting through its board of directors.

DECISION/HELD:

In conclusion, the Court allowed the appeal.

RATIOS:         

• COMPANY LAW- RECEIVER/MANAGER: Purpose of appointment of a Receiver
• COMPANY LAW- RECEIVER/MANAGER: Limit of the powers of a Receiver/Manager in relation to the right of the directors of a company
• COMPANY LAW- RECEIVER/MANAGER: Whether a company under receivership can appoint legal counsel in an action challenging the validity of the appointment of a receiver/manager
• COMPANY LAW- RECEIVER/MANAGER: Whether the fact that a company is in receivership means it loses its corporate/legal personality
• COMPANY LAW- RECEIVER/MANAGER: Whether a receiver/manager has power over the appointment of counsel on behalf of a debtor in an action brought against the debtor by the receiver/manager or creditor

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