Beck was engaged by Dr Russo’s company, Dr Russo MediSpa Limited (“MediSpa”), to fit out MediSpa’s new Spa facility at the Westfield Shopping Centre in West London.

MediSpa terminated the employment of Beck in accordance with clause 13.2 of the contract. In accordance with this clause MediSpa were liable for a net figure of £413,125. Following non-payment by MediSpa, Beck referred the dispute to adjudication. MediSpa was ordered to pay the full amount claimed as well as the adjudicator’s costs.

 

MediSpa did not pay the decision and Beck issued enforcement proceedings. However, MediSpa went into administration, and accordingly the enforcement proceedings were stayed until the outcome of the administration. Beck made an application to lift the stay but this was unsuccessful.

 

Beck then made the current application against Dr Russo pursuant to a personal guarantee which guaranteed MediSpa’s payment obligations. Beck submitted that:

 

1           Dr Russo’s obligations under the guarantee covered MediSpa’s liability under the adjudicator’s decision; and

 

2           In any event, the sum was due pursuant to the contract and Beck was entitled to summary judgement.

 

The Judge held that Beck were not entitled to summary judgement, and dismissed the application:

 

1           The Judge had decided that Dr Russo was bound by the guarantee as he had, as surety, consented to various material variations to the contract. However, Dr Russo had a real prospect of defending the claim, with regard to whether the adjudicator’s decision was binding on Dr Russo, as guarantor. The Judge referred to longstanding case law that states a third party, often a surety, cannot be bound by a decision of a judge, jury or arbitrator, where he is not a party to the proceedings, and could have no effect on the proceedings; and

 

2           Again, Dr Russo had a real prospect of defending the claim, of whether the sum was due pursuant to the contract. The Judge accepted Dr Russo’s submissions that he could use the same defences of set-off and/or counterclaim for defective or incomplete works, as MediSpa could have done under the contract. MediSpa had relied upon a withholding notice in the adjudication, and accordingly the Judge could not determine whether this was effective or not without further submissions, which would not be suitable for this summary judgement application.