WESTMINSTER CITY COUNCIL v SPORTS AND LEISURE MANAGEMENT LTD

[2021] EWHC 98 (TCC), Technology and Construction Court, Kerr J, 22 January 2021

Interpretation of contract – Allocation of loss of customer revenue as a result of Covid-19 pandemic

The defendant managed a leisure centre under the terms of a contract which it concluded with the claimant council. The contract required the defendant to pay a management fee to the claimant. The contract made provision for the making of adjustments to the financial terms of the contract in the event of various changes to the law which had an impact on the performance of the contract. As a result of the Covid-19 pandemic the leisure centre was closed for a period of time or could only open subject to significant restrictions on its operation. This extended period of closure or restricted operation led to a loss of consumer revenue and the issue which divided the parties related to the identity of the party which had to shoulder this loss of revenue. A particular issue of dispute was whether the management fee could be reduced below zero so that it could oblige the claimant to make payment to the defendant (the so-called reverse or negative management fee).