A group of Wellington taxi drivers are taking their own company to court, saying a policy to provide financial relief that begun during Covid-19 is unfair and conflicted
Drivers working for Wellington Combined Taxis say a policy was pushed through during the Covid-19 pandemic that has since forced them to subsidise the rest of the company.
At Wellington Combined Taxis' annual meeting in September 2020 a resolution was passed to give those whose cabs were off the road a substantial reduction in their monthly levy fees, to help ease pressures created by the lockdowns.
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Shareholders with a taxi in service would pay $370 a month, lowered from $434, while those not operating at all would only pay $40 a month.
At the time drivers were unhappy with this because those who couldn’t afford to simply park up were left to provide nearly all of their company’s operating revenue.
In addition, uncertainty remained over whether the vote that approved this policy was legitimate.
It passed by a small overall majority, but some drivers understood the correct way should have been to ensure a majority across both types of shareholders – that is a majority vote for drivers and a majority vote for non-drivers.
“It's added huge financial shortfalls. We feel strongly that the board has acted unethically.” - Theo, taxi driver and shareholder.
However despite complaints, that policy has remained in place with drivers now having to pay $430 each month while those without a cab in operation continue on a far lower rate of $46.
The company has 496 shares – each correlating to a taxi. Some own just the one share that they drive under, others own more and lease them out to drivers who don’t want to buy into the company, and some own shares but don’t drive or lease them out.
A spokesperson for the group of drivers, Theo, said having two different levies was not in the best interests of the company.
“The differential policy created two classes of shareholders; owner-drivers and investors and unfairly placed a huge financial burden on one group solely being the working owner-drivers .
“It's added huge financial shortfalls. We feel strongly that the board has acted unethically.”
Company financial statements for the year ending March 2022 show nearly all of the company’s operating revenue is generated by drivers.
Almost half of the company’s total operating revenue was from levies alone.
The group is seeking leave from the High Court in Wellington to take what is known as derivative action.
“On the face of it, it's quite hard to understand why a company that needs more revenue would have a policy that results in it collecting significantly less revenue." - Adrian Olney, lawyer.
Not particularly common, derivative action allows a shareholder or director of a company to bring proceedings on behalf of the company against the board, if the company won’t do it itself.
In essence, it facilitates the enforcement of directors’ duties owed to the company where the company has failed to take the necessary enforcement steps.
A lawyer for the group, Adrian Olney, said the proceeding would determine whether the split levy system was valid.
“The various things that might lead it to be an invalid policy include whether or not it breaches the company's requirements for different classes of shareholders to be given a vote.
“But there are also concerns about whether or not the directors who have imposed the policy were properly focused on the best interest of the company, and were doing it for a proper purpose.”
“On the face of it, it's quite hard to understand why a company that needs more revenue would have a policy that results in it collecting significantly less revenue,” he said.
Drivers have speculated the differential levy is only in place because it favours board members and company management who own about 100 shares combined.
Olney said the process was still in its early days.
“My clients will request permission to bring the claim in the name of the company. If that permission is granted [by the court], then the company will be suing its directors.
“And, in essence, what they will ask the court to do is to declare the differential billing policy to be invalid, bring it to an end, and order that the directors compensate the company for the revenue that was lost as a consequence of the policy while it was in place.”
