The Annandale and Eskdale Sports and Leisure Trust has launched a legal bid to gain compensation from Dumfries and Galloway Council (DGC) over a decision to cut short a contract to run local leisure facilities.

Trust bosses argue that the council has gone back on a service level agreement made in 1998, which would see the not-for-profit organisation take responsibility for the management of eight facilities, including Annan Swimming Pool and three public parks. However, DGC decided in May last year that it intends to take the services back in-house from 31 March 2010, despite the trust's claims that it has saved the council around £100,000 a year on non-domestic rates bills.

The trust has also invested £1.5m since the start of the service level agreement in upgrading both Newington Leisure Centre and Annan Swimming Pool, as well as maintaining all existing services and reducing operating costs. Alan Barlow, the trust's managing director, said: "The council's actions have substantially damaged the local service, much needed facility refurbishments have been cancelled, important new positions remain unfilled and worryingly sponsorship and grants have dried up and staff motivation has been badly affected.

"The legal action against Dumfries and Galloway Council is a bid to rectify the situation and gain the compensation owed to the Leisure Trust for the council discrediting its 21 year agreement." However, DGC denies that a 21-year agreement had ever been in place, with an initial five-year contract implemented in 1998 before being renewed and extended up until 31 March 2010.

The council also rejected suggestions that its decision will have a negative impact upon local leisure provision, and also revealed that it is willing to pay compensation if the trust provides evidence of a valid claim. A DGC spokesperson said: "The council has advised the trust that, if there are valid claims for compensation they will be paid. The council has asked the trust to provide details and dates, the funding sources used to carry out the improvements, and the estimated level of compensation that it believes is due.

"However, the trust has consistently refused to provide the council with any financial information."