Are parties required to mediate? For the first time, the Singaporean High Court had the chance to decide on this question in the case of Maxx Engineering Works Pte Ltd v PQ Builders Pte Ltd. The High Court ultimately held that it was just and equitable to order specific performance to compel the counterparty to refer the dispute to mediation as part of its contractual obligation.
Despite mediation being a consensual process, the terms of the contract in this case provided that in the event of a dispute, the parties “shall endeavour to resolve the dispute through negotiations” and “if 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.
A dispute arose, and the respondent referred the dispute to arbitration pursuant to Clause 55, without referring first to mediation. The respondent contended that it was not obliged to mediate before invoking its right to arbitrate, noting Clause 54 where it further stated that “prior reference of the dispute to mediation under this clause shall not be a condition precedent for its reference to arbitration…”. The applicant agreed to certain extent that although Clause 54 cannot stop the counterparty from commencing arbitration, it argued that the said clause imposed an obligation for 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 above and applied a literal interpretation of Clause 54 by its plain wording. The High Court also found that the order of such specific performance was “just and equitable” because damages were not an adequate remedy if specific performance was not ordered as well as the fact that the respondent would not suffer substantial hardship from the order. The order cannot be said to have futile and causing serious difficulty as there was no evidence to suggest that mediation process between the parties would be pointless and impractical.
This judgment demonstrates that Singapore court has a pro-enforcement attitude towards agreements to mediate. However, whether the court could compel parties and make such an order depends on the factual circumstances of each case. In making such order, the court considers various factors to weigh whether it would be just and equitable to do so. From a practical standpoint, it is pertinent for parties to decide whether mediation is mandatory or a mere optional step in the dispute resolution process and use the appropriate language to affect the same.