In brief
In Maxx Engineering v PQ Builders Pte Ltd [2023] SGHC 71, the General Division of the High Court of Singapore (“High Court“) dealt with the novel issue of whether a party could be compelled by a court order to refer a dispute to mediation pursuant to its contract with a counterparty, even if it did not want to mediate. The High Court held that it was just and equitable to order specific performance such that in effect, the relevant party was compelled to mediate in accordance with the bargain which they struck.
Key Takeaways
- Notwithstanding the fact the mediation is typically a consensual process, it is possible to obtain a court order to compel a party to refer a dispute to mediation in an appropriate case.
- Parties have to be careful when drafting their dispute resolution clauses. The courts will treat dispute resolution clauses like any other contractual clause, and will hold the parties to their contractual bargain. If a party seeks to deviate from the contractually agreed mechanism for dispute resolution, the courts will not hesitate to order relief which effectively holds a party to what they promised in their contract.
- In the event a dispute arises, a party should not assume that they can move immediately to litigation or arbitration without first considering the parties’ agreed mechanism for dispute resolution, or they might otherwise inadvertently incur more costs in rectifying any non-compliance with the agreed mechanism.
In Depth
In Maxx Engineering v PQ Builders Pte Ltd [2023] SGHC 71, the applicant had sought an order compelling the respondent to refer their dispute to mediation under the Singapore Mediation Centre (“SMC“) pursuant to a contract between them.
Clause 54 of the contract provided that in the event of a dispute, the parties “shall endeavour to resolve the dispute through negotiations” and “[i]f negotiations fail, the parties shall refer the dispute for mediation at the [SMC] in accordance with the Mediation Rules for the time being in force”. Clause 55 of the contract provided that if the dispute was not resolved by the parties in accordance with Clause 54, the parties shall refer the dispute for arbitration.
When a dispute arose between the parties, the respondent referred the dispute to arbitration pursuant to Clause 55, without referring the dispute to mediation. The respondent argued that it was not under a contractual obligation to refer the dispute to mediation before resorting to arbitration, because Clause 54 had stated that “[f]or the avoidance of doubt, prior reference of the dispute to mediation under this clause shall not be a condition precedent for its reference to arbitration…” [emphasis added].
The applicant agreed that Clause 54 did not oblige the parties to mediate before commencing arbitration, but argued that Clause 54 obliged the parties to attempt both mediation and arbitration so long as arbitration of the dispute had not been concluded.
The High Court agreed with the applicant’s contention and found that by its plain wording, Clause 54 imposed a legal obligation on the parties to refer their dispute to mediation, if negotiations failed. The High Court also found that it was just and equitable to order specific performance compelling the parties to refer the dispute to mediation, because (a) damages were not an adequate remedy if specific performance was not ordered, (b) the respondent would not suffer substantial hardship from the order, (c) an order for specific performance would not be futile as there was no evidence that mediation would be futile and (d) the order for specific performance would not be impractical as there was no serious difficulty in determining whether the respondent had taken specific and concrete steps to refer the dispute to mediation.
Accordingly, the High Court granted the applicant an order for specific performance to compel the respondent to refer the dispute to mediation.
This was the first reported decision in Singapore of a court ordering specific performance to compel a party to refer a dispute to mediation. It is also noteworthy that this decision dovetails with the greater emphasis by the courts on the amicable resolution of disputes in the Rules of Court 2021, which came into effect in April 2022.
