A Reminder of the need to consider the question of interlocutory costs orders when either conducting negotiations or drawing up a final order is provided by S v S (Family proceedings: Reserved costs orders) [1995] The Times, 23 February.During the case several interlocutory 'reserved costs' orders were made in particular concerning certain injunction proceedings.

The wife was successful after a five-day ancillary relief hearing and her solicitors then produced a schedule of all her costs but without any specific reference to the interlocutory matters.

The argument at the hearing proceeded on, and was determined upon the basis of, the total amount of costs incurred by the wife.

She was awarded her costs on an indemnity basis.

The order as drawn, however, simply provided that 'the husband do pay the wife's costs on an indemnity basis to be taxed if not agreed'.

No mention was made of the reserved costs.

The wife's solicitors subsequently lodged their bill of costs for taxation including the reserved costs.

The husband's solicitors objected, arguing that failure to mention the reserved costs in the final order meant they were irrecoverable.The wife's solicitors applied for a supplementary order for the reserved costs to be made costs in the application.

Mr Michael Horowitz QC, sitting as a deputy judge of the Family Division, held that at the conclusion of matrimonial proceedings the party seeking payment of any reserved costs should seek a specific direction on this.

However, the Family Division has a discretion to award reserved costs which are not so requested.His Lordship based his decision first on the authority of British Natural Premium Provident Association v Bywater (1897) 2 Ch 531 where Mr Justice Byrne had said that reserved costs were not to be allowed without special direction at judgment or on subsequent application.

Secondly, he relied on Cobbold v Garrett (1929) WN 16 where the court had indicated that the granting of such applications would be based on doing that which justice demanded.His Lordship found that this was a straightforward case where he should exercise his discretion.

The interlocutory proceedings had been appropriate and so there was merit in including the reserved costs of these proceedings in the final order.

The court at first instance had plainly intended that the wife should be entitled to those costs.

His Lordship accepted that in the course of drawing up a complex order the standard phrase 'including costs reserved' had simply been omitted because it had been overlooked.So, in matrimonial proceedings, any negotiations for a final settlement must specifically refer to any previously reserved costs.

If the costs of all proceedings are to be paid by one party then provide so in the proposed consent order, for example, 'the petitioner/respondent do pay the respondent/petitioner's costs to be taxed if not agreed including those reserved by the order(s) dated...' If each side is to bear its own costs including the reserved costs then you might provide, 'No order for costs including the costs reserved by the order(s) dated...' If the only costs to be paid are those reserved then such might be expressed as, 'No order for costs save the petitioner/respondent do pay the respondent/petitioner's costs reserved by the order(s) dated...' At the conclusion of a contested hearing ensure your detailed schedule of costs includes any previously reserved and seek a specific direction as to the inclusion of this or otherwise.RSC ord 62, r.3(6) sets out a table defining the costs dealt with in this article.

Such applies to the county court by virtue of CCR ord 38.In non matrimonial cases the party successful at the final hearing and securing a costs order automatically recovers the reserved costs of any interlocutory matter unless the court directs otherwise.

It is for the paying party to apply to the court for a specific order if he or she seeks to avoid liability for such costs.In negotiations remember to raise the question of payment of any reserved costs - either each party is now to bear its own costs of that matter or express agreement must be reached as to responsibility for payment of such.

In preparing for a final hearing marshall your arguments as to why your client should not pay any reserved interlocutory costs should he or she find him or herself on the wrong end of the judgment.

As reserved costs follow the final costs order it is likely that the court does not retain any discretion to deal with such costs thereafter - S v S clearly limited its application to the Family Division only.

So, if your client has a good argument as to why he or she should not pay the reserved costs, failure to put this forward may amount to negligence.In the case of named party's costs/costs in any event the named party is entitled to the interlocutory costs whatever the outcome of the action.

Even if your client loses at trial he or she will be able to recover such costs.

If you act for the successful party do not forget to remind your client that he or she will still have to pay this type of interlocutory costs order previously made against him or her.

It can, of course, be set off against the costs awarded to the client.If your client is on the receiving end of this type of order or is aggrieved by any sort of interlocutory costs order you must appeal this as you cannot on taxation or review seek to challenge the order as wrong or ultra vires (see Cope v United Dairies (London) Ltd [1963] 2 QB 33).In negotiations it is often proposed that a settlement is to be on the basis of 'no order for costs'.

Where there has been an interlocutory costs order in favour of one party i n any event it is vital that both parties consider whether such is to be enforced or waived.

As those costs are payable whatever the outcome of the case then arguably they remain payable despite the settlement which does not refer to them.

Indeed, unless you expressly raise this matter with your client and then the other side, it is likely you will end up with the situation whereby the payer believes the matter cancelled and the payee still expects payment.

Unless both parties can now agree on the previously overlooked costs then the payer will probably seek to enforce the interlocutory costs order.

If successful, as seems likely, then the payee will claim negligence against his or her solicitor for failing to advise that the costs remained payable despite the agreement.

Should the court find against the payer then, of course, he or she will sue his or her solicitor for failure to advise that the costs were no longer recoverable.In a legal aid matter where the payer and his or her solicitor both overlook the previously favourable costs order the reminder is going to come when the bill of costs is drawn up for taxation.

Otherwise, until the client recalls the matter ignorance will be bliss for all concerned.

The moral is to ensure all interlocutory costs orders are taken into account when advising the client on settlement and in negotiations.

The final agreement or order should expressly refer to such.Costs in the cause or costs in the application are recoverable by the party who secures an order for costs at the final hearing.

If the matter does not proceed to trial then you need to resolve the question of all costs of the proceedings in negotiations.

Failing this you will be faced with the situation which arose in the case of JT Stratford & Son Ltd v Lindley (No.2) [1969] 3 All ER 1122.In the case of interlocutory costs orders at first instance, the Court of Appeal and the House of Lords were all in the cause.

The action then 'went to sleep' (per Lord Denning MR) or 'simply lain like a dead pigeon in the street' (per Winn LJ).

Neither party wanted to go on with the action and neither wished to pay the other's costs.

The defendants applied for an order to strike out the plaintiffs' claim for want of prosecution with costs.

The plaintiffs cross applied for leave to discontinue on terms that the defendants paid the costs or otherwise as the court saw fit.The Court of Appeal held that to do justice between the parties the plaintiffs should be allowed to discontinue but with there being no order for costs: each party therefore had to pay its own costs for the entire proceedings.

The court was not prepared to consider the merits of the plaintiffs' action.

It was not a question of determining whether or not the plaintiffs might have succeeded at trial and recovered their costs.

The court was not in a position to try the action; especially one which neither party wished to take to trial.

The parties were only prepared to fight on because they did not wish to pay the other's costs.

The court was not inclined to dismiss the plaintiffs' action without giving the plaintiffs the opportunity of going on nor prepared to say to the plaintiffs that to avoid paying the defendants' costs it had to continue the action.The equitable solution was for the action to end with each party bearing its own entire costs given that there had been no prior determination of any of the interlocutory costs.In the named party's 'costs in the cause' order, where your client is the named party, he or she will only be entitled to the interlocutory costs if h e or she secures a costs order at the final hearing.

If your client loses at trial he or she will not be able to recover such interlocutory costs but equally will not have to pay the other side's costs of that matter.

If you act for the successful party at trial do not forget to remind your client that he or she will still not recover the costs where this type of interlocutory order has previously been made against him or her.Again in negotiations any proposed settlement must consider if the named party is now to recover the interlocutory costs.

As these costs are only payable if that party is successful at trial then arguably such will not become payable where any settlement is reached on the basis of 'no order for costs' and which does not specifically refer to such costs.

It is hard to see how the payer could seek to enforce the interlocutory costs order as it only takes effect by securing the costs order at the final hearing.

He or she will, of course, seek to sue his or her solicitors if they failed to advise that the costs were not recoverable under the agreement.

Once again the moral is to ensure all interlocutory costs orders are taken into account when advising the client on settlement, in negotiations and in the final agreement or order.Pursuant to the 'costs forthwith' order the client is immediately entitled to recover the interlocutory costs awarded in his or her favour without awaiting the final taxation: the authority is RSC ord 62, r.8(2).

If desired you may seek such costs to be assessed by the court there and then if you have available a schedule detailing them.

Otherwise attempt to agree these costs or proceed to taxation.It should be noted that this costs order cannot be made against a legally aided party (r.8(3)).

You should seek it where your opponent has brought an interlocutory application which was never going to succeed.

In Frogmore Estates plc v Berger [1989] 138 NLJ 1560 the court held that a party bringing or conducting an interlocutory application improperly may have an order for immediate taxation and payment of costs made against him or her since the proper administration of justice requires that the court limit the growth of large interlocutory applications involving an investigation of the merits.

As Vice-Chancellor Browne-Wilkinson put it, 'in all but the clearest cases the proper occasion for consideration of the merits is at trial'.This order is not limited to cases where the court wishes to show its disapproval of an application.

In Kickers International SA v Paul Kettle Agencies Ltd (1990) FSR 436 the deciding factor was the unusually heavy costs involved, some £55,000.

The plaintiff had brought actions against three defendants alleging infringement of designs and copyright.

The defendants served lengthy evidence in reply such that the plaintiff offered not to proceed with the interlocutory injunctions on the basis of an order that the costs be the defendants' in the cause.

The defendants sought and obtained costs in any event payable forthwith.In the event of 'costs thrown away', the client is awarded the costs of the interlocutory application literally wasted due to the opponent's conduct.

Most commonly this is the expense of a consequential amendment or parties being added to the action.If your client obtains judgment in default and proceeds to enforce it, what costs can he or she recover as thrown away by that judgment subsequently being set aside? In Andromeda v Holme (1923) 130 LT 329 the plaintiff enforced the judgment by way of execution, garnishee proceedings and a bankrup tcy notice and a petition.

Then the judgment was set aside on terms that the defendant made a payment into court and paid all costs thrown away.

On taxation none of the enforcement costs were allowed.

On review the court held that costs reasonably taken to enforce the judgment were recoverable where they were directly referable to the action.

As such the costs of execution and garnishee proceedings were recoverable but not the bankruptcy action.So costs thrown away must be directly referable to the proceedings and be found to be reasonably incurred on taxation.

The plaintiff's costs of perfecting and enforcing the judgment were costs literally thrown away as a result of the judgment being set aside.

But the bankruptcy proceedings stood quite independent of the action and the court made it clear that a specific direction would be necessary for such costs to be included.Difficulties can therefore arise as to precisely what costs are to be paid pursuant to an interlocutory order.

The solution is to have the court specify precisely what is covered if there is any element of doubt.

But what if no direction is given as is usual at the moment? When do steps taken and costs thereby incurred which lead to an interlocutory order start to count against the payer?RSC ord 62, r.1(4) defines costs as including fees, charges, disbursements, expenses and remuneration in relation to proceedings and costs of or incidental to such.

In Re Gibson's Settlement Trusts [1981] 1 All ER 233 the court held that where a named party is awarded the costs of, and incidental to, the application this includes the costs reasonably incurred in preparation for it.

So unless the order specifies any particular pre-interlocutory hearing step taken by the payee's solicitors it will remain at the discretion of the taxing officer as to whether a matter is covered by the order and if so payable as being reasonable.POINTS TO REMEMBER-- In negotiations make express provision for the payment or otherwise of all interlocutory costs orders.-- Record all costs orders on a separate schedule.--Ensure that schedule is prominent on the file and available to the advocate at all hearings.-- Agree the schedule with the other side before the final hearing.-- Ensure costs estimates are generally available at any interlocutory and final hearing.-- On any interlocutory application ensure a costs order is made.-- Inform the client of the effect of a costs order when made.--In negotiations remember to consider with the client and the other side all previously made costs orders.-- Ensure a final settlement or order refers to all interlocutory costs orders.-- If there is any doubt as to whether certain costs will be covered by an order seek a specific direction.