Neconde and Nestoil win major victory as Supreme Court overturns appellate ruling

In a landmark victory with far-reaching implications for corporate governance in Nigeria, the Supreme Court has awarded Neconde Energy Limited and Nestoil Limited a decisive victory, overturning the Court of Appeal’s earlier ruling and redefining the legal boundaries of receivership.

The dispute, between Neconde Energy Limited and FBNQuest Trustees & others, began with a preliminary objection challenging the jurisdiction of the appeal. The respondents had argued that the issues raised were of a mixed nature in fact and law, and required prior permission from the court.

However, in a firm and unanimous position, the Supreme Court rejected the objection, holding that the issues were strictly questions of law. This paved the way for the Court to hear the appeal on its merits.

At the heart of the case was the question of whether a liquidator/manager has exclusive authority to appoint a legal representative for a company under receivership, thereby sidelining the company’s board of directors.

In its ruling, the Supreme Court held that, where the legality of the appointment of a liquidator/manager is challenged, the company retains the power to act through its board of directors, including the appointment of legal counsel.

The Court emphasized that denying a company this right would create an unjust situation, effectively depriving it of the means to challenge potentially illegal control over its assets. It also noted that such a scenario could lead to a conflict of interest where a liquidator seeks to control both the management and legal representation of the company.

Consequently, the court of first instance upheld the appeal, annulled the Court of Appeal’s decision that had disqualified the company’s lawyer and restored Neconde’s standing to sue.

The court also held that Nestoil Limited, whose appeal was linked to Neconde’s, is an equitable participant in the victory.

Legal observers say the ruling marks a significant victory for business rights and sends a clear warning against the misuse of receivership as a tool to suppress legitimate legal challenges.