Struggling financially, Wellington Combined Taxis was sold to Auckland Co-op Taxis for two million dollars, only after a fiercely fought battle between Wellington drivers which saw the High Court making novel use of Companies Act administration procedures effectively putting Wellington Combined on the block: giving drivers a choice between an Auckland takeover, or refinancing by current Wellington owners.
Wellington’s traditional taxi services have been in decline for nearly a decade, accelerated by covid-19 lockdowns, a downturn in the regional economy and the rise of online competitors such as Uber. In the last five years, annual patronage fell fifty per cent from 1.2 million rides to less than 600,000.
Wellington Combined is asset rich, holding property with a market value of more than one million dollars; but suffers ongoing operating losses with accumulated losses for the five years ending 2024 totalling nearly three million dollars.
About one-third of taxi licences held by Wellington Combined drivers sit unused, non-operational because driving is not profitable. Taxi licences which changed hands for $50,000 ten years ago, now struggle to find a buyer at $2000.
It was a 2020 decision by Wellington Combined directors to reduce monthly levies charged non-operational members that blew open the dispute. A number of active drivers alleged this reduction was made primarily to benefit directors personally, an allegation they deny.
When Companies Act court approval was given a ginger group of active drivers to challenge directors’ selective levy reduction, with the company to bear all litigation costs, directors promptly put Wellington Combined Taxis Ltd into administration.
Companies Act administration is intended to allow an insolvent or ‘near-insolvent’ company to take stock, blocking ongoing legal claims, while future prospects are considered.
Administration envisages creditors voting on possible future action: restructuring or liquidation.
The legal novelty facing Justice Boldt was that Wellington Combined Taxis creditors were at no immediate risk of being left unpaid. In fact, during the court hearing, Bank of New Zealand was sufficiently encouraged about Wellington Taxis’ financial prospects that it extended the company’s overdraft limit by a further $200,000.
In the High Court, Justice Boldt imposed a two-step process: first, a vote by Wellington Taxis driver/shareholders on two rival proposals put forward; then second, a vote by creditors on whatever option shareholders approved.
One proposal would see Auckland Co-op Taxis buying out Wellington Combined Taxis’ assets, offering franchise opportunities to Wellington drivers.
The other proposal envisaged a promised $1.5 million injection of cash from a new investor, election of a new board, and operating revenue improved with an increase in monthly levies charged drivers.
Recognising that the vagaries of voting, having some shareholders holding multiple taxi licences, might see both proposals getting more than fifty per cent support, Justice Boldt ruled that the proposal getting the greater level of support was to be put to creditors for further approval.
Companies Office records show a sale to Auckland Co-op at two million dollars was approved, with payment to be made in twelve monthly instalments.
Rahman v. Shephard – High Court (5.06.25)
25.136