If commuters in the capital had difficulty catching a cab on Tuesday, it’s likely due to at least a dozen drivers watching a unique course of action play out against their bosses in the High Court
Drivers at Wellington’s largest taxi firm are trying to get back hundreds of thousands of dollars lost to a Covid-19 relief policy.
The almost-500 shares of Wellington Combined Taxis are held by a mix of those who drive cabs and those who lease them out to other drivers without a stake in the company. READ MORE: * Wellington taxi drivers take company board to court * Calls to bring 30-year-old company law into the future
The policy in question came into effect in late 2020 and gave those whose cars were not in operation a significant reduction in their monthly levy.
A group of driver-shareholders complained the decision was not in the best interests of the company because the overall revenue now coming in was lower, and that it disproportionately benefitted investors over owner-operators.
They want the company to take action against the board for a breach of duties in allowing this policy to pass, but it won’t. So instead, they are asking the court to take derivative action, which is available under the Companies Act.
In essence, it allows the shareholders to take the action on behalf of the company when the company won’t do it itself.
Lawyer for the group, Adrian Olney, told the court the decision to reduce levies made no sense.
“On the face of it giving up a very significant proportion of the company’s operating revenue year on year is not in the interests of the company ... it’s very difficult to see how that can be.
“A decision by directors to voluntarily forego a revenue amount of that significance to the company is only one you would expect to be done after a thorough analysis ... losing revenue tends to be bad.”
He estimated about $1 million in revenue had not been collected thanks to the lower rates.
Linking to this, Olney said there were conflict of interest issues at play.
“You have a significant number of directors that are investor-shareholders that stand to gain from the policy.
“Some then bought further shares [after the resolution was passed] ... not saying they’re not allowed to, but it does raise the conflicts issue.”
Jammed into one of the smallest rooms in Wellington's High Court, drivers and board directors and management sat on opposite sides of the floor.
The former chairman of the company also made the trip from the South Island to see how the case played out.
All but one of the board members were represented by lawyer Michael Cavanaugh.
Cavanaugh told the court the true nature of the levy had been mischaracterised, and it had never pitted investor-shareholders against driver-shareholders.
“Nowhere is there a distinction between owner-operators and those who own shares for lease.
“The actual levy is based on drivers’ use of services. It is a levy available for everyone.”
He said with this in mind the other concerns the driver-shareholders had “fell away” including the conflict of interest concerns.
“This was not done for the benefit of the directors and it cannot be said that directors who own multiple shares benefit from a distinction.”
According to information on the Companies Office website four directors own multiple shares, with the board chair owning outright, or part-owning 18 shares.
Cavanaugh said the impact of Covid-19 on this decision could not be understated.
“This company, overnight, lost over 90 percent of its business.
“This is not a blip on the radar. Covid-19 and its effect has been on the directors’ mind. It was an unprecedented time that would extend for an unknown period of time and its effects are still felt.”
He said there were more appropriate actions shareholders could take through the Companies Act, including a provision for prejudice if they felt this way, but that the threshold for derivative action had not been met.
If a trial can occur, the group will seek a declaration that invalidates the policy as well as damages against the directors to reflect the revenue that the company missed out on as a result of the policy.
The hearing continues Wednesday.
