Maxx Engineering Works Pte Ltd v PQ Builders Pte Ltd

Facts

Maxx Engineering Works Pte Ltd and PQ Builders Pte Ltd were parties to a sub-contract. Clause 54 provided that if a dispute arose the parties would try to negotiate, and if negotiations failed they "shall refer the dispute for mediation at the Singapore Mediation Centre". It added that prior reference to mediation was not a condition precedent to arbitration and did not affect either party's right to arbitrate under Clause 55, which provided that unresolved disputes "shall" be referred to arbitration.

When a dispute arose, PQ referred it to arbitration under Clause 55 without referring it to mediation. Maxx then brought Originating Application No 621 of 2022 for an order compelling PQ to refer the dispute to mediation under the Singapore Mediation Centre's rules. Maxx accepted that mediation was not a precondition to arbitration, but argued that the parties had to refer the dispute to both mediation and arbitration while the arbitration was not concluded.

Issues

1. Whether Clause 54 placed the parties under a legal obligation to refer their dispute to mediation.
2. Whether it was just and equitable to order specific performance compelling PQ to refer the dispute to mediation.

Holding

Kwek Mean Luck J found that the parties were legally obliged to refer the dispute to mediation and granted Maxx's application, making an order of specific performance in terms of prayers 2.1 and 2.2 of the application to compel PQ to refer the dispute to mediation. The judge noted there appeared to be no previous case law on specific performance of such an obligation.

Reasoning

On the first issue, PQ relied on the statement that mediation was not a condition precedent to arbitration, but that did not answer Maxx's point that both forms of referral were required. PQ accepted that "shall refer" in Clause 55 imposed an obligation to arbitrate, and the same words in Clause 54 had to impose an obligation to mediate. Cheung Teck Cheong Richard v LVND Investments Pte Ltd [2021] 2 SLR 890 was distinguishable: the clause there only required the parties to "consider" mediation, and a further clause expressly said it was not a legal obligation to mediate. Nothing similar appeared in this sub-contract.

On the second issue, the court weighed the factors from Lee Chee Wei v Tan Hor Peow Victor [2007] 3 SLR(R) 537. Damages would be an unsuitable substitute for the bargained-for referral to mediation, and PQ did not argue otherwise. PQ did not claim substantial hardship. Its argument of futility, based on Maxx not having made a settlement proposal, failed because neither side had shown it was unwilling to mediate. The order was practical to supervise, since it required concrete steps such as confirming assent to the Singapore Mediation Centre, giving dates and providing a case summary. Mediation could benefit both sides, the parties' chosen dispute resolution method should be respected, as the Court of Appeal said in Toshin, and the order was consistent with the duty under O 5 r 1(1) of the Rules of Court 2021 to consider amicable resolution.

From the judgment