Company administrator knew his telco ropes

We recently saw a case where a telco was outsmarted by a company administrator who knew what the Corporations Act has to say about telco services.

The telco — we’ll call them SuperTel — was owed substantial arrears by a company that was heading down the financial gurgler.

When the customer was placed under administration, SuperTel saw its chance to get paid.

To keep the business going, the administrator needed the phones and internet working, and it wasn’t practical to change providers in the time available. So SuperTel offered a tough deal: ‘Pay out the customer’s arrears or we turn off service at noon.

Pity SuperTel’s lawyer didn’t know about section 600F of the Corporations Act 2001.

Basically, it says that a supplier of ‘essential services’ to a company that goes into administration cannot say ‘Administrator, you will get no service until the customer’s arrears, pre-dating the administration, are paid.’

‘Essential service’ is defined to mean electricity, gas, water or a carriage service within the meaning of the Telecommunications Act 1997. That includes most fixed line, mobile and internet services.

End result: SuperTel had to keep supplying the customer, despite past debts. Of course the administrator had to pay current accounts for service, but the arrears remained unpaid.

The same rule applies to liquidations and similar company situations.

We’ve also seen a different case where a mobile wholesaler was about to cut supply to a defaulting reseller, and an administrator stepped in. He also demanded that wholesale supply of services be continued, arguing that section 600F applied. This time, it was the administrator who needed better advice.

For reasons that are too complex to set out here, it’s clear that section 600F only applies to electricity, gas, water and carriage services to be supplied to a company for its own consumption. The section is designed to ensure a business can keep its doors open, lights on and phones ringing during administration. It doesn’t guarantee it access to wholesale carriage services for resupply to end users, rather than use by the business itself.