Is There An Obligation To Mediate? The General Division Of The High Court Orders Specific Performance To Compel A Party To Refer A Dispute To Mediation ' Maxx Engineering Works Pte Ltd v PQ Builders Pte Ltd [2023] SGHC 71

• Published date: 11 July 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: PD Legal
• Author: Gerard Quek

Is There An Obligation To Mediate? The General Division Of The High Court Orders Specific Performance To Compel A Party To Refer A Dispute To Mediation - Maxx Engineering Works Pte Ltd V PQ Builders Pte Ltd [2023] SGHC 71

Executive Summary

1. In Maxx Engineering Works Pte Ltd v PQ Builders Pte Ltd [2023] SGHC 71 the High Court held that specific performance could be ordered to compel a party to refer a dispute to mediation when the underlying contract contained a clause obliging mediation. This was because:

(a) The wording of the clause obliged mediation if negotiations failed; and

(b) On the facts, the test for whether specific performance could be granted as set out in Lee Chee Wei v Tan Hor Peow Victor [2007] 3 SLR(R) 537 ("Lee Chee Wei") was satisfied. i.e., it would be just and equitable to order specific performance.

Background

2. In the suit, the applicant, Maxx Engineering Works Pte Ltd ("Maxx") and the respondent, PQ Builders Pte Ltd ("PQ") entered into a sub-contract (the "Sub-Contract"). One of the clauses in the Sub-Contract, Clause 54, set out that "...the parties shall refer the dispute for mediation" if negotiations to resolve the dispute failed. On the other hand, in Clause 55 of the said Sub-Contract, it sets out that if the dispute was not resolved in accordance with Clause 54 of the Sub-Contract, the parties "shall refer the dispute for arbitration by an arbitrator."

3. Without referring the dispute to mediation, PQ referred the dispute to arbitration under Clause 55 of the Sub-Contract. In response, Maxx commenced OA 621 for, inter alia, an order to compel PQ to refer the dispute to mediation as obligated under Clause 54 of the Sub-Contract.

4. The two main issues in this case were:

(a) Whether there was a legal obligation to refer the dispute to mediation; and

(b) Whether it was just and equitable to order for specific performance.

Issue 1: Whether there was a legal obligation to refer to mediation

5. Both parties accepted that they were not contractually obligated to mediate the dispute before commencing arbitration. However, Maxx noted the phrase "shall refer" in Clause 54 and 55 of the Sub-Contract implied that both parties had to attempt to resolve the dispute through mediation and arbitration as long as the arbitration of the dispute had not concluded (at [7]).

6. Kwek J observed that PQ did not dispute that the phrase "shall refer" in Clause 55 of the Sub-Contract which imposed an obligation to arbitrate the dispute (at [10])...