A 40-YEAR JURISPRUDENTIAL CONTROVERSY LAID TO REST

In a landmark judgement, the Supreme Court of Nigeria, has today, put to rest the over 40-years controversy  on the right of a company in a disputed receivership, to appoint its own counsel to represent it in a proceeding against its creditors and where the subject of the dispute, is the propriety or otherwise, of appointment of a receiver manager. Until now, decisions of the Court of Appeal have been sharply divided between two parallels. Whilst one school of thought holds that the appointment of a receiver over the affairs of a company or its assets freezes the powers of directors of the company, including the power to appoint counsel, the other, creates an exception in cases where the company in question challenges the appointment of the receiver manager over it, and argues  that in such a scenario, it would be preposterous for a  receiver manager appointed by a Creditor company to appoint counsel for the debtor-company in a proceeding where the debtor company not only disputes the debt, but also challenges the appointment of the receiver.

This jurisprudential landmark finds enablement in the highly controversial dispute between Nestoil/Neconde and its junior lenders led by FBN Quest Merchant Bank Ltd. It may be recalled that in a considered Ruling of the Lagos Division of the Court of Appeal, on 23rd January, 2026, the intermediate appellate Court disqulified the legal team of Neconde Energy Ltd, holding that it is/was the Receiver Manager appointed by their creditors, that had the powers to appoint counsel and represent it in any proceeding, including those where the propriety or otherwise of the appointment is at issue. In other words, the Court re-enacted the position of the jurisprudential school of thought which posits that the appointment of a receiver manager cripples the powers of directors and leaves the company as it were, at the mercy of its Creditors and their appointed agents, qua receiver manager.

This state of affairs, laid the foundation for today’s historic judgement. Led by Chief Wole Olanipekun, SAN, the Neconde Legal Team approached the Supreme Court and urged it to set aside the judgment of the Court of Appeal which unwittingly compromised a fundamental pillar of Natural Justice, namely, audi alterem partem. It was a very contested appeal, lacking only in the invitation of amicus curiae by the Court.

However, in a unanimous decision of a 5-Member panel of the Court, their Lordships allowed the appeal holding amongst others that, the appointment of a receiver manager does not affect the company nor its legal personality and the rights that attach to it. Instructively, their Lordships clarified with oracular finality that where a debtor company challenges the validity of appointment of a receiver manager over it, it will be ultra vires the powers of the receiver manager to appoint counsel to represent the debtor company in the proceedings, in what is clearly an affirmation of the Court of Appeal’s decision in UBA Trustees Ltd v Nigergrob Ceremic Ltd (1987) 3 NWLR (Pt.62) 600 delivered on 2nd June, 1987.

This decision represents a watershed moment for insolvency practice in Nigeria in particular, and Nigeria’s adjectival jurisprudence in general. Certainly it would be received with mixed feelings amongst a section of insolvency practitioners who had always relied on the lacunae in the Companies and Allied Matters Act, 2020 and the flux in the case law on the subject, to visit hardship on alleged debtor companies. Not anymore!

This is a triumphant moment for our much criticised Supreme Court and I should add that it deserves commendation for the dispatch with which it attended to the matter given the far reaching consequences of the Court of Appeal’s decision which operated to entrap Nestoil & Neconde in what may be described as a legal limbo. With the clarity afforded by this historic judgment, the coast is thus clear for the embattled companies to pursue their pending appeal at the self same Supreme Court seeking to set aside the crippling interim orders of the Court of Appeal of 27th November, 2025 which has operated, not only to freeze their operational bank accounts but also the sealing of the iconic Nestoil Towers at the heart of Victoria Island.

Indeed, the wheel of justice may be slow sometimes, but it surely arrives at its destination.

 Raymond Nkannebe, Senior Associate, Wole Olanipekun & Co.