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THE APPOINTMENT OF A RECEIVER/MANAGER DOES NOT OFFEND FOSS v. HARBOTTLE

Dictum

It is clear law that if owing to disputes among the directors they are unable to act and the affairs of the company cannot be carried on the court will interfere by an injunction or by the appointment of a receiver or manager of the undertaking and assets of the company until the management of the company is restored to a proper footing. See Featherstone v. Cooke (1873) L.R. 16 Ex 298; Trade Auxiliary Co. v. Vicker L.R. 76 Ex 303; and Standfied v. Gebbon (1925) W.N. 11 1925. The above principles will apply in my view in a situation where owing to disputes as to shareholdings the conduct of the affairs of a company will suffer or will be in jeopardy. In my judgment, the appointment of a receiver or manager of the undertaking and assets of a company in the situations I have just described above will not and cannot offend against the rule of Foss v. Harbottle (supra). In such a situation there is paralysis or imminent paralysis of the conduct of the affairs of the company, which the court by its intervention has to avert by the appointment of a receiver or manager for the company.

— Agbaje JSC. Okoya & Ors. V. S. Santilli & Ors. ( SC.206/1989, 23 MAR 1990)

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A COMPANY UNDER RECEIVERSHIP MUST SUE VIA THE RECEIVER/MANAGER

A company under receivership can be sued. However, if the company is to sue in order to recover or protect the property charged, it can only do so with the sanction of the Receiver/Manager by virtue of the fact that it is the Receiver/Manager that controls its assets and runs its business.

– Uwais, JSC. Intercontractors v. National Provident (1988)

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APPOINTMENT OF A RECEIVER DOES NOT DISSOLVE THE COMPANY

The appointment of a Receiver/Manager does not operate as a bar to the exercise of the right of parties, other than the debenture holders, against the company in receivership; because the appointment of a Receiver/Manager over the assets and business of a company does not ipso facto dissolve the company nor make it lose its legal personality.

– Uwais, JSC. Intercontractors v. National Provident (1988)

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LEGAL CONSEQUENCES OF APPOINTING A RECEIVER/MANAGER

The legal consequences of appointing a receiver/manager is that the assets which hitherto were available to the company become seised of the control of the receiver/manager and the company can only deal with assets of the company with the receiver’s consent. Consequently, the receiver/manager is regarded as the agent of the company for the purpose of dealing with assets in receivership. See K.P.M.G. Marwick Ani Ogunde & Anor –V- Vidana Nigeria Ltd & Ors (2021) LPELR – 54935 (CA). And also the provisions of Section 393 (4) of the Companies and Allied Matters Act 2020 explicitly provides that as from the date of appointment of a receiver or manager, the powers of the Director or Liquidators in a members voluntary winding up to deal with the property or undertaking over which he is appointed shall cease unless and until the receiver or manager is discharged.

– M.L. Shuaibu, J.C.A. Dekan Nig. Ltd. v. Zenith Bank Plc – CA/C/12/2020

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THE APPOINTMENT OF A RECEIVER IS A MATTER OF DISCRETION

In Viola v. Anglo-American Cold Storage Company (1912) 2 Ch. 305, Swinfen Eady J, gave what is acceptable as the reason why leave of the Court is necessary for a receiver to institute or defend actions whether the appointment of Receiver/Manager is by court or under a debenture-holder’s deed. He said at pp.310-311. “It is however, well settled that in a mortgagee’s action where a receiver and manager has been appointed it is for the court to determine whether proceedings shall be taken at the expense of the mortgaged property. The receiver cannot do this of his own initiative, but would run the risk of his cost being disallowed if he did not obtain the direction of the Court (see Bristowe v. Needham (1847) 2 Ph.190 and Wynn v. Lord Newborough (1790) 3 Bro. C.C. 88, and neither mortgagor nor mortgagee has any absolute right to insist upon an action being brought or to prohibit it being brought by the receiver at the expense of the mortgaged property. The appointment of a receiver is a matter of discretion to be governed by the circumstances of the case; see Lord Truro’s judgment in Owen v. Homan (1851) 3 Mac & G, 378, 412. It is made in the first place for the protection of the estate and for the benefit of all concerned, and in sanctioning the receiver taking proceedings the court has regard to what it considers right and proper in the interest of all parties.”

– Karibi-whyte, JSC. Intercontractors v. National Provident (1988)

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ACTIONS BY RECEIVERS ARE EQUITABLE

I wish to add that actions by receiver which is commonly referred to as equitable execution is indeed equitable relief, and this is because of the hindrance in the way of execution at law.

– Karibi-whyte, JSC. Intercontractors v. National Provident (1988)

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[DS] A RECEIVER MANAGER NEED NOT BE A PARTY TO THE SUIT AS HE IS AN OFFICER OF THE COURT

‘See Section 389 (1) of the Companies and Allied Matters Act CAMA A receiver when appointed by a court is not an agent of either party to the litigation. He is rather an officer of court when appointed over land, real property or corporate body. He de jure takes over possession and his appointment operates as general information against all the parties to the litigation. See Uwakwe v Odogwu (1989) 5 NWLR (pt. 123) 562. Also a receiver as such is not entitled to bring an action in his own name as receiver, this is because no property is automatically vested in him by his appointment, but he may acquire a right to sue in his own name out of his receivership but not in consequence of it alone. See Intercontractors Nigeria Ltd v U. A. C Nig. Ltd (1994) 3 NWLR (pt. 333) 481 at 490. In the case at hand, the Receiver/Manager is not required to be a party to this case before this motion or the appeal could be heard. He is an officer of the court executing the orders and powers vested on him by reason of that appointment. It is for these reasons that I hold that this leg of the preliminary objection is misconceived. The other legs of the objection could be taken together with the application … ‘It is my considered view that by the reasons of the said appointment, he is deemed an officer of the court, and not a party to the case. See Section 389(1) of the Companies and Allied Matters Act (CAMA). A receiver when appointed by a court is not an agent of either party to the litigation. He is rather an officer of court. When appointed over land, real property or corporate body he de jure takes over possession and his appointment operates as a general injunction against all the parties to the litigation. See Uwakwe v Odogwu (1989) 5 NWLR (pt 123) 562 Per Kawu and Nnaemeka-Agu JJSC at pp 576 paras E, F & G; and p 589 paras D G. Also a Receiver as such is not entitled to bring an action in his own name as receiver; this is because no property is automatically vested in him by his appointment, but he may acquire a right to sue in his own name out of his receivership but not in consequence of it alone. I refer to Intercontractors Nigeria Ltd V. U.A.C Nigeria Ltd. (1994) 3 NWLR (pt 333) 481/490. In the instant case, the Receiver/Manager is not required to be a party to this case before this motion or the appeal could be heard. He is an officer of the court executing the orders and powers vested on him by reason of that appointment. It is for these reasons that I hold that this leg of preliminary objection is misconceived.’

— M.S. Mutaka-Coomassie, JSC. Shinning Star Nig. Ltd. v. AKS Steel Nigeria Ltd. (2011) – SC. 101/2010

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