Wellington Combined Taxis is in turmoil with owner drivers challenging levy rebates allowed those retired drivers struggling to lease out their taxis. The High Court gave approval for legal action to be taken against Wellington Combined directors in the co-op’s name and at its cost.
The traditional model of metropolitan taxi services operating as a co-op with drivers as shareholders sharing overhead costs is under increasing financial pressure. Shares in a local taxi co-op used to trade at a premium when co-ops had a stranglehold on local licences, enjoying a local monopoly. Increased number of taxi licences on issue and the Uber revolution has destroyed that.
Value of shares in taxi co-operatives has plummeted; revenues are down and costs up, particularly costs of upgrading call centre and communication systems. Customer preferences to pay by credit card has reduced driver revenue further; operator margins now eroded by the cost of co-ops sitting between the driver and banks, taking a cut on collection.
Owner drivers holding shares in Wellington Combined Taxis Ltd objected to a management decision allowing rebates on monthly charges granted to lessor shareholders, predominately those retired drivers who remained shareholders earning passive income while leasing out their vehicle for someone else to drive.
The High Court was told these lessor shareholders are suffering financially, having to still pay co-op monthly levies at a time when they cannot find anyone to lease their taxi.
Combined Taxis currently levies owner drivers $490 per month to meet overhead costs; lessor shareholders pay the same with the levy reduced to just under $53.00 per month when the taxi is idle with no-one willing to lease. On one estimate, Combined Taxis stands to lose half a million dollars revenue each year as a result of this differential levy. This at a time when Combined Taxis is operating at a loss. Exact figures were supressed in the publically issued court judgment.
Associate judge Skelton approved a request by a group of owner drivers that legal action be taken in the name of Combined Taxis and at its cost. They allege directors discriminated against them as driver shareholders. They claim directors should personally reimburse Combined Taxis for revenue lost because of the levy concession allowed lessor shareholders.
Judge Skelton ruled there is an arguable case that Combined Taxis directors did not act in good faith and acted improperly. In particular, directors should have got prior approval from shareholders before introducing the concession, with shareholders split into two separate groups for the vote: driver shareholders in one group; lessor shareholders in the other. The effect of the levy concession was to discriminate between shareholders and their rights as shareholders.
Roe v. Wellington Combined Taxis Ltd – High Court (2.10.23)
23.174