Africa-Press – Malawi. Legal experts have sharply questioned the Reserve Bank of Malawi’s (RBM) directive ordering trustees of the Public Service Pension Trust Fund (PSPTF) to rescind the controversial purchase of Amaryllis Hotel, arguing that the regulator may be stepping beyond its legal authority.
The Registrar of Financial Institutions, George Partridge, has given the trustees seven days to reverse the K128.75 billion transaction or face administrative penalties for breaching prudential limits and defying an earlier directive to suspend the deal.
But senior legal practitioners say the directive raises a fundamental issue of contract law: Can a third party order the rescission of a contract between a willing seller and a willing buyer?
According to lawyer James Kaira, the answer is clear.
“A contract between two competent parties cannot simply be undone by a regulator who is not a party to it. Rescission is a judicial remedy. It is granted by a court, not imposed by administrative correspondence.”
Privity of Contract
At the centre of the controversy is the doctrine of privity of contract — a foundational principle in contract law.
Under this doctrine, only parties to a contract have the legal standing to enforce, vary or rescind it. A third party, no matter how powerful, cannot interfere with the contractual rights and obligations of others unless specifically empowered by statute.
Legal analysts say that while RBM has supervisory authority over pension funds under the Financial Services Act, that authority does not automatically translate into the power to nullify concluded commercial agreements.
“If trustees breached prudential regulations, the Registrar can sanction them. He can fine them. He can remove them. But that does not automatically invalidate the contract itself,” said Kaira.
The Indoor Management Rule
Experts also point to the well-established rule in Royal British Bank v Turand, commonly known as the Indoor Management Rule.
The principle protects outsiders dealing with a company. It allows them to assume that internal procedures and approvals have been properly followed, provided they act in good faith and the transaction falls within apparent authority.
In this case, the seller of Amaryllis Hotel would have been entitled to assume that PSPTF trustees had complied with internal and regulatory requirements before signing the agreement.
“The law does not require a seller to investigate whether a pension fund has complied with every internal directive from its regulator,” Kaira noted. “Commercial certainty depends on that protection.”
Regulatory Breach vs Contractual Validity
RBM’s letter alleges that trustees ignored a November 14, 2025 directive to halt the transaction and proceeded despite knowing the Fund would breach prudential investment limits.
Legal experts acknowledge that such conduct, if proven, would be serious and could justify penalties under Sections 39 and 75 of the Financial Services Act.
However, they caution that a regulatory breach does not automatically render a contract void.
“Unless the statute expressly states that contracts entered into in breach of prudential limits are void, the contract remains binding between the parties,” said one senior commercial lawyer.
In most cases, illegality or ultra vires conduct must be determined by a court. Rescission typically requires judicial intervention, especially where substantial funds have been paid and property rights transferred.
Potential Legal Battle
If PSPTF attempts to rescind the agreement solely on the basis of the Registrar’s directive, the seller could challenge the move in court, potentially exposing the Fund to damages for breach of contract.
“This could turn into protracted litigation,” warned Kaira. “You do not unwind a K128 billion commercial transaction without judicial oversight.”
The controversy surrounding the Amaryllis acquisition had already intensified due to reports that the property’s valuation rose from approximately K47 billion in 2024 to K128.75 billion at the time of purchase in November 2025.
Now, the focus has shifted from valuation concerns to the legality of regulatory intervention.
Broader Implications
Legal observers say the case could have far-reaching implications for regulatory authority and commercial certainty in Malawi.
“If regulators can unilaterally cancel contracts after they are concluded, it introduces uncertainty into the market,” said Kaira. “Investors need to know that contracts entered into lawfully will not be undone by administrative decree.”
As the seven-day deadline approaches, the matter may ultimately require judicial clarification.
For now, what was once a controversial property acquisition has evolved into a test of the limits of regulatory power — and the enduring principle that a third party cannot lightly rescind a contract between a willing seller and a willing buyer.
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