A legal perspective on Government reforms to the Commercial Passenger Vehicle industry

Logie-Smith Lanyon lawyers look at the Victorian Government's legalisation of rideshare and what it means for the taxi industry from a legal perspective.

By David Grant, Partner and Eliza Buchanan, Solicitor, Logie-Smith Lanyon

This article has been written assuming the government will implement changes consistent with what has been announced at the time of writing.

Close to two years after UberX’s unauthorised introduction to the Victorian market, after protests on the steps of parliament, taxi blockades, sit-ins, rallies and a cabinet leak to boot, the Victorian Government’s long awaited passenger transport industry reforms have finally arrived.

So, what are the key elements of the Andrews’ Labor government taxi industry reforms?

  1. Ride-sharing will be legalised;
  2. The current taxi licensing system, will be replaced with a single license framework, over the next two years;
  3. There will be one market for taxi, hire car and ride-sharing services;
  4. The cost to purchase a license, in that single market, will be significantly reduced;
  5. Taxi fares will be deregulated;
  6. Commercial passenger vehicle providers (including taxis, hire cars and ride-sharing services) will charge a $2 levy for each ride, which will be used to fund a compensation package for existing license holders;
  7. Existing perpetual and fixed term license holders will receive $100,000 for their first license, and $50,000 for their second license, in compensation for the “buy back” of their licenses;
  8. A fairness fund will be established with $50m to assist license holders who experience immediate financial hardship as a result of the licensing reforms;
  9. “The knowledge” test has been abolished;
  10. All commercial passenger vehicle drivers (including ride-sharing drivers) will  be required to be accredited;
  11. Rank and hail work is only available to those who meet stringent safety requirements.

How will the changes be implemented?

The government’s announcement foreshadows legislation. It does not mean that the changes are immediately in force. With the exception of the removal of section 159 of the Transport (Compliance and Miscellaneous) Act, the process of passing a bill through parliament is long, uncertain and there is opportunity for influence and change. Once the bill has been debated, voted upon, and passed through both the Legislative Assembly and Legislative Council of the Victorian parliament, it will receive “Royal Assent” from the Victorian Governor, and will, only then, commence as law.

Given the long path that a bill must travel before it becomes an act of parliament, it is not expected that most of the reforms will be implemented until late 2017, early 2018.

Practical Effect of the Reforms– Compensation for License Holders

Two areas of the reforms have received significant publicity: the $2 fee per ride, and the compensation proposal.

Given the legalisation of ridesharing services, and the creation of a single market, it became necessary for the government to remove the perpetual and fixed term licenses from the system. This overhaul of the taxi licensing systems has meant the value of the perpetual and fixed term taxi licenses dropped markedly. Accordingly, in order to compensate those suffering financial losses as a result of the law reform, the government will be making payments to eligible license holders, the maximum of which is $100,000 for the first metropolitan or urban license, and $50,000 for the second license. The scales of compensation are less for regional and country license holders.

Clearly, this will be significantly unfair for those with more than two licenses.

Apparently to compensate for this, the government has also proposed to create a “Fairness Fund” which license holders can claim on if they are experiencing undue financial hardship as a result of the transition to the new licensing system.

Whilst, on the face of it, the compensation scheme seems reasonable, it fails to recognise that the purchase of perpetual licenses were many families’ nest eggs – the sole investment for a family, or of an individual's superannuation fund, which was purchased from the government, in some instances, at a grossly inflated price of up to $500,000.

Further, those who purchased more than two licenses are now stuck with compensation at a maximum of $150,000 for assets they may have invested millions of dollars in.

Whilst, the compensation package in Victoria is significantly better than that passed in NSW – where compensation is $20,000 for one license, and $40,000 for two or more licenses, regardless of the number of licenses owned, it is understandable that there is considerable anger and concern at the uncertainty and significant loss of value.

What recourse is available? It will be necessary to consider the purchase documentation in relation to each license, on an individual case-by-case basis, before providing any definitive views.

It remains to be seen whether the government can actually compensation license holders – section 90 of the Transport (Compliance and Miscellaneous) Act provides that no compensation is payable by the government in the case of suspension, cancelling or revoking licenses. Of course, this section simply means that the government cannot be compelled to issue compensation to a license holder – the announcement that the government will do so, anyway, is unlikely to be restrained by section 90.

In any event, the government sold licenses in respect of which it received money, and in respect of which, no party ever contemplated the removal or cancellation of those licenses.

Whilst the provisions of section 51(xxxi) of the Constitution of Australia, that provide that the acquisition of property by the Commonwealth must be on just terms, has no equivalent in Victoria, clearly, it would be unconscionable for the government to refrain from compensating license holders.

Practical Effect of the Reforms - Assignment Agreements

Many taxi license owners have assignment agreements with drivers, where they “assign”, or rent out their right to operate the license plate, to another person, the “assignee”, in exchange for a fee.

The consequence of the government’s restructuring of the licensing system means that some parties to these assignment agreements may no longer wish to abide by those agreements – as it will likely be easier for assignees to simply purchase their own taxi licenses.

It is important to note that all assignment agreements and documentation must be considered individually and on a case-by case basis. Assignment agreements are likely to be able to continue, irrespective of the proposed law reform.

The consequences of not abiding by the terms of an assignment agreement is a breach of contract, which may result in civil proceedings between the parties to that agreement.

It is important to abide by assignment agreements until they expire, or until alternative agreement is entered into between the parties. Until the complete transition to a single license system is finalised in early 2018, all taxis must continue to operate under a valid taxi license.

Practical Effect of the Reforms - Passenger Levy

A $2 fee, per ride, will be charged to all Network Service Providers and operators, in order to fund the aforementioned compensation package. This includes all ridesharing, hire car and taxi journeys. It is not yet clear how this is to be collected, or by whom.

Challenges lie ahead for the taxi industry in determining exactly how, practically, the levy will be imposed, collected from passengers, and paid to the government. Despite having nine months to digest the passenger levy in NSW, a workable solution to imposing and collecting the levy is yet to be determined.

So – watch this space.





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