Travel Expenses: Overhead or Disbursement?

  • October 01, 2015
  • Brandon Hastings

Interpreting Rule 14-1(5)

Examinations for Discovery (XFDs), applications, mediations, trial management conferences and trials: attendance is rarely optional. Yet, the current state of the law requires parties to bear their own costs associated with getting to and from such processes. 

Supreme Court Civil Rule 14-1(5) insulates innocent parties from certain litigation expenses by providing successful parties with “a reasonable amount” for disbursements that have been “necessarily or properly incurred.” Currently, however, jurisprudence excludes travel expenses from the scope of Rule 14-1(5).

Overhead is not
a Disbursement

A leading case on point, Parent v Lohia, 2012 BCSC 1677 (CanLII) (“Parent”) concludes “travel expense, mileage and parking... must be considered to be an item of overhead, not a proper disbursement.”

Parent was adopted in Park v Koepke, 2013 BCSC 1806 (“Park”), which stated: “local transportation and binding (office supplies) are considered to be items of overhead and I will not allow them.”

Neither Parent nor Park provide much discussion vis-à-vis what makes travel costs overhead, which raises an important question.

WHAT IS OVERHEAD?

The Court of Appeal provides a definition:

general expenses… as rent, lighting… it is in the nature of “overhead” costs that they are… costs which cannot be assigned with precision to an aspect of the business activity of the enterprise... [emphasis added].1

Take a widget factory that both creates and packages widgets for example. The cost of the raw material that goes into each widget can be assigned with precision to an aspect of the business: widget-creation. In accounting, this is a direct cost. Conversely, items such as rent cannot be precisely assigned to either widget creation or packaging: an indirect cost. Allocation of indirect costs between activities is at best a guess, and as such imprecise.

The cost of materials in widget-making is analogous to travel costs in litigation. Both costs are assignable with precision, to particular activities of the enterprises bearing them. Travel costs are assignable to particular mediations, XFDs, etc., and material costs are assignable to the particular activity of widget-manufacture.

It is at least arguable, therefore, that travel expenses are not overhead, and as such ought to be considered a proper, recoverable disbursement.

EXPLICIT STATEMENT
IN THE RULES

A statement in the Rules further militates in favour of travel expenses as a disbursement. The bottom of the tariff scale in appendix B of the Rules, provides: “In addition [to the above], reasonable travelling and subsistence expenses are to be allowed as a disbursement.” This statement appears on its own row, without an item number or a unit amount.

For completeness, it should be mentioned that this statement has been interpreted as part of tariff item 48 (Pardo v Young, 2013 BCSC 2203 at para 44), despite the fact that no other tariff item in the Rules has a modifying clause listed on a separate row. There is no discussion in Pardo of why this statement does not, as one might expect, stand on its own.

Rule 14-1(5) generally provides innocent parties with protection from certain direct financial costs of litigation. It is also part of a larger framework that creates a disincentive for unfounded and meretricious claims and defences. To the detriment of successful parties, costs related to travel have been interpreted out of Rule 14-1(5).

In light of an explicit statement in the Rules, and a striking dissimilarity between travel costs and overhead, however, this interpretation may be in need of review.

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Han v 9938 Investments Ltd., 1995 CanLII 2030 (BC CA) at para 7 

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Brandon Hastings is a lawyer at Daryl Brown and Associates, and member of the Civil Roster of Mediate BC.