Contract

Supply of services - recipient claiming entitlement to VAT invoice so as to facilitate recovery of input tax - no implied term in respect of free-standing statutory obligation - no taxable supply of services until payment made or VAT invoice issuedEurophone International Ltd v Frontel Communications Ltd:Ch D: Mr Justice Ferris:25 July 2001In July 1997 the defendant entered into a contract to supply the claimant with telecommunications services.

By July 1998 the claimant was in financial difficulties and had little prospect of paying its bill.

The defendant stopped invoicing the claimant.

In the hope of recovering input tax on the defendant's VAT invoices the claimant commenced proceedings against the defendant alleging the defendant had breached an implied term of the parties' contract to supply the claimant with a monthly VAT invoice (to facilitate the claimant's recovery of input tax).

The claimant sought specific performance of the alleged implied term or alternately damages.

The defendant applied to the court for the claim to be struck out as having no reasonable prospect of success.Mark Cran QC and David Marks (instructed by Brooke North, Leeds) for the claimant; Michael Briggs QC and David Drake (instructed by Bird & Bird) for the defendant.Held, striking out the claimant's statement of case, that the claimant's reliance upon regulation 13 of the VAT Regulations 1995 (SI No.

2518 of 1995) in support of its contention that it was an implied term of the parties' contract that the defendant would furnish a VAT invoice once a month was misplaced since if the regulation did impose a legal obligation to provide such an invoice there would be no need to imply a contractual term to the same effect; that regulation 13 imposed a requirement to provide a VAT invoice upon a person making a taxable supply, and the defendant only made a taxable supply to the claimant when it received payment or issued a VAT invoice; that the claimant's financial circumstances were such that there was no question of it making payment in respect of the services supplied by the defendant; and that the general duty imposed upon every trader to keep proper accounting records did not justify the implication into commercial contracts of a term relating to invoicing, since it would be necessary to do so in the case of every contract for the supply of goods or services; that the claimant was not entitled to specific performance, since it had not performed and/or was not ready to perform its own contractual obligations in full, by paying for the services it had received; and that the claimant was not entitled to damages either, since even if it were entitled to damages equal to the input tax not recovered, the defendant could set off the sums it was owed under the same contract against this liability.