I have the same issue with BT. Here below some advices I've picked up from the forums
"I called Trading Standards as I'd never received a contract, terms and conditions or information on cancellation charges: they said to ask BT to send you a copy of the contract you signed and their terms and conditions, if they can't do that and BT rely on a verbal contract, they have to prove they actually told you (E.g. retrieve the recorded phone conversation at the time you agreed to take on the service). And if they can't prove that they told you then they CAN NOT force you to pay the cancellation fee."
"As a customer who has also worked in the telecoms industry, has threatened and complained about telecoms suppliers to the regulator I'm extremely fustrated that telecomes companies still don't understand stand they to have to abide by the Unfair Terms in Consumer Contracts Regulations 1999. The telecoms industry needs to clean their act up and not try to rely on the fact that a customer paying a bill agrees to all the terms and conditions of a complex verbal contract with no recordings or paperwork, as if the customer takes them to court the company's case can easily be taken apart."