Deputy Federal Commissioner of Taxation v. Sargon.Judges:
Supreme Court of Victoria
The Deputy Commissioner of Taxation (``The Deputy Commissioner'') has sued Jules Sargon for $16,678.19 being the balance of tax instalments deduction alleged to have been made by the defendant as a Group Employer for the purposes of Div. 2 of Pt VI of the Income Tax Assessment Act 1936, together with certain additional tax payable pursuant to sec. 221F(10) of the Act. The sum is said to be payable pursuant to sec. 221P(1) of the Act in respect of deductions made from the salary or wages of the defendant's employees for the period from March 1977 to September 1978.
The defendant denied that he is liable to pay any sum to the Deputy Commissioner and, although in his defence he denied that he had paid any wages to his employees, in substance his case now is that either he or one of his employees actually paid the wages each week to the employees but that the moneys supplied for that purpose came directly from the bank account of Sargon Engineering Pty. Ltd. (``the Company''), a company controlled by him and his wife. He asserted that each week during the relevant period sufficient moneys only to pay the employees net wages were paid by that company, so that no sums in respect of income tax were deducted by him in the sense that no sums were, or could have been, retained by him in order to pay what is commonly called ``group tax'' to the Deputy Commissioner in accordance with the requirements of sec. 221F(5) of the Act. On the other hand, it is conceded that there was set out on each pay packet a gross sum for wages, together with the appropriate deduction for income tax calculated in accordance with the Third Schedule of the Income Tax Regulations in force from time to time and the resulting net sum actually contained in the pay packet. Moreover, it was also conceded that group certificates were issued by the defendant and copies forwarded to the Deputy Commissioner in each relevant year, pursuant to sec. 221F(5)(b) and (f), which set out the gross salary earned by each employee and the total of the deductions made in each year for income tax.
Essentially, the dispute now is whether a ``deduction'' of income tax instalments, the amount of which an employer is made liable to pay under sec. 221F of the Act, requires only the reduction of an employee's gross salary or wages by the arithmetical subtraction of the prescribed amount of income tax and payment
ATC 4208to him of the net amount resulting from that calculation, or whether it also requires the retention of the sum deducted by the employer. I should add that no claim has been brought by the Deputy Commissioner pursuant to sec. 221N of the Act for payment of the sum claimed as an ``amount which (the defendant) has failed to deduct'', nor was any application made to amend the endorsed statement of claim to add such a claim in the alternative.
The evidence in the case can be shortly summarised. The Deputy Commissioner tendered only a certificate under sec. 221R(2) of the Act which certified that the defendant was a group employer during the period March 1977 to September 1978 inclusive and that the sum of $16,678.19 was due to the Commonwealth in respect of amounts payable to the Commissioner of Taxation pursuant to sec. 221F(5)(a) and (10) of the Act in respect of that period. The Deputy Commissioner's certificate, which was dated 28 March 1985, was by sec. 221R ``prima facie evidence of the matters stated in the certificate''.
No other evidence was led on behalf of the Deputy Commissioner. The only other evidence in the case came from the defendant in oral evidence to the Court. In many senses the defendant's evidence was unsatisfactory especially as no books or records relating to his business during the relevant period were produced and tendered in evidence, nor were any from Sargon Engineering Pty. Ltd. I doubt the accuracy of the defendant's recollection especially as he conceded that he could not now remember dates and other details. He did not explain satisfactorily the absence of any records of his own relating to the business he conducted under the name Zodiac Fabrications and Installations and he said he no longer had access to the records of the Company because the Company had been wound up by order of this Court on 21 June 1979. Moreover, he had made no attempts to look at the records of the Company nor was any subpoena issued to require the attendance of the liquidator at Court. Again he gave evidence about a Mr Mulcahy who had acted as his and the Company's personal accountant during at least part of the relevant period but he did not explain why he had made no enquiries of Mr Mulcahy except that he though that he had now retired from practice. Again there appeared to be no attempt to obtain records from him relating to the defendant's business.
What did appear was that from a date at least as early as 1975 two businesses had been carried on, one by the Company and one by Mr Sargon under the name of Zodiac Fabrications and Installations (``Zodiac''). The Company had premises in Dandenong at which it fabricated steel for use principally in the building trade. The business carried on by the defendant under the name Zodiac was engaged in erecting steel fabricated by the Company and other machinery and plant. So far as I could ascertain, during the relevant period all contracts were made in the name of the Company for both fabrication and installation but the Company sub-contracted the installation work to the defendant's business. The Company had an office, an accountant and a number of employees but Zodiac appeared to have only 6 to 8 employees although it nevertheless obtained registration as a group employer under sec. 221F. The defendant attempted to distinguish two periods in the operation of the business known as Zodiac. At first he employed Mr Mulcahy to do the accounting work of the business and Mr Mulcahy prepared the pay packets each week for him. They were prepared in the conventional way with a gross sum, the amount of the tax instalment deducted and a net figure on the outside of the packet, which contained in cash the net pay for each employee. As a matter of practice Mr Mulcahy obtained the cash each week and was reimbursed directly by the defendant for the sums contained in the pay packets as well as for the sums which were at that time remitted to the Commissioner of Taxation in accordance with the requirement of the Division.
Neither business flourished and in particular the Company had severe liquidity problems, because of which the defendant said that it was unable to pay the defendant's business Zodiac anything for the work which it performed on a sub-contract basis. At a date, which may have been as early as April 1976 but which the defendant conceded in cross-examination he could not remember with any degree of precision at all, the defendant stopped paying Mr Mulcahy the amounts required for the net wages of Zodiac's employees and for his group tax. Whether Mr Mulcahy retired at the same time or whether he continued as the Company's accountant for some time afterwards, the defendant seemed quite unable to remember. The new procedure then adopted for the
ATC 4209payment of wages to Zodiac's, and thus the defendant's employees was that the company drew a cheque on its account which was then cashed for the sums necessary to put into each of the Zodiac's employee's pay packet. Although some attempt was made to suggest that the Company was then employing Zodiac's employees, it was conceded that those employees remained the employees of the defendant's business and not of the Company throughout the relevant period. The better view appears to be that, as the Company owed Zodiac a substantial amount for work performed as sub-contractor, the cheques drawn and used for the payment of wages were in effect in part satisfaction of the debt which the Company owed the defendant. Moreover it was clear that the actual payments of the net wages were made either by the defendant or his foreman and were not made by the Company or any of its employees. Again, so far as I could ascertain, the records kept by the defendant for the purposes of his business known as Zodiac were still marked with that business name. In particular, the defendant under his business name continued to make separate returns as a group employer pursuant to the provisions of sec. 221F(5), although none of these records was produced in evidence.
Because of the Company's impecuniosity the defendant was able only to pay the net wages and, apart from a single payment of $715.65 in August 1978, he made no payments to the Commissioner in respect of deductions for income tax instalments from March 1977 to September 1978. What the defendant also maintained was that he received no other money from the Company, nor any other business income, which he either retained or could have retained for the purpose of paying the amount of these deductions. The Company's plight was such that all it could afford to pay for a period of approximately 18 months was the net wages of the 6 to 8 employees still engaged by the defendant on its work of installing the steel fabricated by the Company. It was also apparent to me that none of the employees changed employer nor was their wage rate altered because of the defendant's and the Company's financial difficulties. It was not suggested that their wage rate had been reduced to the equivalent of their net wages or that the defendant had paid gross wages to his employees without making a calculation by way of deduction from the gross rates a which they were ordinarily employed. The defendant's case in the end was simply that, as he never had the money to remit to the Commissioner under sec. 221F, he could not have ``deducted'' and did not ``deduct'' the required instalments of income tax within the meaning of that expression in Div. 2 of Pt VI of the Act. This was said to be sufficient answer to the plaintiff's claim as no proceedings had been brought under sec. 221N for failure to make deductions.
I do not consider it is necessary to resolve precisely how reliable was the defendant's version of events. I have reached the conclusion that, on his own admissions, he had made ``deductions'' from the wages paid to his employees at the prescribed rates, in accordance with sec. 221C(1A), but had failed to deal with the amounts so deducted in the manner required by Div. 2 and in particular had failed to pay the amount of the deductions to the Commissioner, as required by sec. 221F(5)(a). For this purpose I have concluded that ``deduction'' within the meaning of the word used in the Division involves the arithmetical subtraction of instalments of income tax at the prescribed rates from the gross income of employees and the payment to them of only the resulting remainder of their wages, that is their net pay. The Division does not specifically require the retention of the amounts so deducted in any identifiable form. Although the provisions contained in this Division assume that a group employer will have sufficient funds to pay the Commissioner the amount of the deductions each month and impose penalties if he fails to do so, he is not obliged to pay those amounts into a trust account or any other separate bank account or to deal with them in a way which separates those amounts from his other moneys.
In my opinion, upon a proper construction of all the provisions contained in the Division, there is nothing in the Division which requires the separate retention by an employer of the amounts so deducted. Nor is there any authority which requires me to hold that it is implicit from the provisions of the statute that the employer is required to retain those amounts separately. For this purpose I shall briefly summarise the relevant provisions, but it should be remembered that I am dealing with the Income Tax Assessment Act 1936 in operation
ATC 4210during the years 1977 and 1978. Very few of the 10 amending Acts passed in those years affected Div. 2 of Pt VI, but I shall refer to the sections of the Act in the form in which they appeared before the passing of the Income Tax (Arrangements with the States) Act 1978 (No. 87 of 1978), which came into operation on 22 June 1978 and amended many of the sections in the Division from that date but which had no relevant effect for the purposes of the present case.
Division 2 of Pt VI of the Act is, as its heading indicates, directed to the collection by instalments of tax on persons other than companies. The starting point is subsec. (1A) of sec. 221C which provided:
``Where an employer pays to an employee salary or wages, the employer shall, at the time of paying the salary or wages, make a deduction from the salary or wages at such rate (if any) prescribed in accordance with the last preceding sub-section as is applicable.''
The last preceding subsection (1) enabled regulations to be made prescribing the rates of deductions to be made by employers from payments of salary or wages and these regulations have for many years prescribed in great detail the precise amount which should be deducted from any particular employee's salary or wages. The word ``deduction'', as were the words ``employee'', ``employer'', and ``salary or wages'', was defined in sec. 221A(1) but not in a way which throws any light on the concept of a deduction for the purposes of the Division. Two principal methods were prescribed for the making of deductions, one by the use of what are known as group certificates and the other by what are known as tax deduction sheets, and these were set out in sec. 221F and 221G respectively. The defendant in the present case is a group employer within the meaning of sec. 221F, but some consideration of the provisions of sec. 221G is necessary in order to understand the scheme of the Division. So far as group employers were concerned, sec. 221F made certain provision for the registration of group employers and then required by sec. 221F(5)(a) that:
``A group employer shall -
- (a) not later than the seventh day of the month next succeeding a month in which he has made deductions, pay to the Commissioner the amount of the deductions so made;''
Subsection (5) also required the group employer to issue to each employee each year a group certificate ``setting out the total of the amounts of the deductions made by him as a group employer from the salary or wages of that employee'' and the group employer should not later than 14 August in each year furnish to the Commissioner a copy of each such group certificate and a statement ``reconciling the total of the amounts of the deductions shown in each of those copies of group certificates with the total of the amounts paid to the Commissioner in respect of those deductions'': see para. (b) and (f). Subsection (10) provided that if any amount remained unpaid after the time it became payable, an additional amount at the rate of 10% per annum should be payable to the Commissioner and subsec. (11) made it an offence to fail to comply with any provision of the section.
Section 221G dealt with employers other than group employers and required those employers to keep a tax deduction sheet in respect of each of his employees and provided by subsec. (1)(a) that the employer shall ``at the time of paying salary or wages to that employee enter in the spaces provided for the purpose on the tax deduction sheet the amount of the salary or wages before making any deduction and the amount of any deduction made''. He was then by para. (b) of subsec. (1) required to purchase not later than the last day of each successive period of four weeks in each year tax stamps ``of a face value equal to the amount of the deductions made by him from the salary or wages of that employee paid during that period''. Not dissimilar provisions were contained in sec. 221G for the giving of certificates to employees and the making of returns to the Commissioner. Section 221H provided that when the Commissioner received a group certificate or tax stamp sheet he should credit to each employee in payment or part payment of the employee's income tax either ``the amount of the deduction shown in any such group certificate'' or the face value of the tax stamps affixed to any tax stamps sheet.
There were two provisions of importance relating to the failure of employers to comply with the provisions in the Division. Section 221P, by subsec. (1) provided:
``Where an employer makes a deduction for the purposes of this Division, or purporting to be for those purposes, from the salary or wages paid to an employee and fails to deal with the amount so deducted in the manner required by this Division, or to affix tax stamps of a face value equal to the amount of the deduction as required by this Division, as the case may be, he shall be liable, and where his property has become vested in, or where the control of his property has passed to, a trustee, the trustee shall be liable to pay that amount to the Commissioner.''
Subsection (2) which has been the subject of much complex litigation, provided:
``Notwithstanding anything contained in any other Act or State Act, an amount payable to the Commissioner by a trustee in pursuance of this section shall have priority over all other debts, whether preferential, secured, or unsecured.''
Section 221N dealt with the failure to make deductions and provided by subsec. (1):
``Where an employer fails to make any deductions he shall, in addition to any penalty for which he may be liable, be liable to pay to the Commissioner the amount which he has failed to deduct, and the Commissioner may sue for and recover the amount which the employer is so liable to pay in any court of competent jurisdiction, or the court before which any proceedings for an offence are taken may order the employer to pay that amount to the Commissioner.''
Subsection (2) required the Commissioner to apply any amount so recovered towards payment of the tax payable by the employee. Significantly subsec. (3) provided:
``The employer may recover from the employee any amount which he has failed to deduct and which he has paid to the Commissioner, or which has been recovered from him by the Commissioner, in pursuance with sub-section (1) of this section.''
The only other section of significance is sec. 221R which provided that an amount payable to the Commissioner under the provisions of the Division should be a debt due to the Queen on behalf of the Commonwealth and may be sued for and recovered by the Commissioner or a Deputy Commissioner.
It is apparent from a reading of these sections that a setting aside of sums deducted from gross wages or salaries was not contemplated, for nothing was said in these provisions as to the keeping in a separate account of the sums deducted, however desirable that may be as a matter of accountancy practice. However, the defendant has argued that, in the opening words of sec. 221P(1) ``where an employer makes a deduction'', the word ``deduction'' meant a deduction effected not merely by reducing an employee's gross wages to a net sum but also by retaining the amount of the deduction either in some tangible form or in an appropriate account. It is asserted that the words ``fails to deal with the amount so deducted'' appearing later in the subsection connote a physical dealing with the amount deducted or at the least the crediting of some account with that amount. The liability created by sec. 221P is thus said to be confined to cases where the sum deducted was retained and did not arise in the present case where the defendant had, at least in the guise of the business Zodiac, never held or retained any moneys representing the amounts deducted, by reason of his business's lack of funds during that period.
In my opinion the scheme of the Division would require that, notwithstanding that sec. 221P be read in the manner suggested by the defendant, the amount deducted could be recovered from the employer although no sums were specifically retained by him. Clearly the employee could not be made liable again because he has already suffered a deduction in his salary or wages to the net sum in fact paid by his employer. Moreover, sec. 221H entitled the employee to a credit in respect of ``the amount of the deductions'' shown in his group certificate or tax stamps sheet. So the question arises, what section other than sec. 221P creates a right in the Commissioner to recover unpaid deductions? Counsel for the defendant submitted that the Commissioner's cause of action should have been based on the liability created by sec. 221N(1) which arose ``where an employer fails to make any deductions''. His argument required that these words in the subsection be read as comprehending an employer's failure to retain the amount of the deductions, not his failure to reduce his employee's wages.
I cannot agree with this contention. Section 221N was directed solely to cases where there was a failure to deduct instalments in the sense of a failure to reduce an employee's wages to what I have called his ``net pay''. The rest of the section clearly indicated that it was intended to create a liability in an employer where his employee received his gross salary or wages not reduced by any sum for tax instalments. Subsection (2) assumed that the employee had received his gross wages and therefore had no right to a credit pursuant to sec. 221H, for it provided that the Commissioner should apply any amount towards an employee's income tax only when he recovered that amount had already been deducted from an employee's gross wages for tax instalments, for the subsection gave the employer a right to claim from his employee ``any amount he has failed to deduct'' from the employee's wages when that amount had been recovered by the Commissioner from the employer pursuant to subsec. (1). Section 221N was thus not directed to failure to retain sums already deducted and the word ``deduction'' must be therein confined to the arithmetical reduction of an employee's wages to his net pay.
This conclusion causes me to reject the defendant's argument that the appropriate cause of action against him was based on the liability created by sec. 221N(1). Furthermore, it is entirely consistent with the Commissioner's claim pursuant to sec. 221P(1). The same intepretation of the word ``deduction'' in that subsection, as not connoting any element of retention, leads to the conclusion that a failure ``to deal with the amount so deducted'' in the required manner comprehends a failure to pay to the Commissioner the deducted amount, although it had not been retained, as well as a failure to pay over any amounts in fact retained by an employer.
Nothing in the other principal sections, 221C, 221F and 221G would deny this conclusion, and the word ``deduction'' in each of those sections logically should be confined to the arithmetical reduction of an employee's wages by the prescribed instalments of tax. Moreover such an interpretation is entirely practical. No doubt an employer could draw sufficient sums to pay the gross salaries of his employees and then set aside the amount of the instalments of tax but that would normally be an elaborate and unnecessary procedure. Likewise the employer could, and in most cases does, make an entry in his accounting records in the sum of the deducted amounts, but that only notionally constitutes a retention of the sum deducted unless there is an actual payment into a specific bank or other account. If the entry in the accounting records also involved the impressing of a trust upon sums held in a particular account, no doubt that would sufficiently identify those sums in a manner which could be described as a retention of them. But the Division does not require any identification or earmarking of credits in bank or other accounts. In many businesses it would be fortuitous whether the sums drawn for wages came from a bank account in credit or in overdraft, for they frequently operate at least one account which is overdrawn without there being the slightest suggestion of insolvency or unbusinesslike conduct. Unless the Division required the payment of the amounts deducted into a specific account, the act of retaining amounts deducted under the Division must depend entirely on the accounting and business methods employed by the particular employer. I am satisfied that the Division imposed no such obligation and that its object was to create a debt, no doubt of a special kind, requiring the prompt payment to the Commissioner of the amount of the tax deducted. These practical considerations, as well as the absence of any specific requirement for setting aside or retaining the sums deducted in a very complex series of provisions contained in both the Act and Regulations, points to the conclusion that retention of the tax instalments was not part of the legislative scheme relating to the collection of tax by instalments.
I have, however, been troubled by some observations in judgments in the High Court relating to the retention of moneys for the purpose of paying tax instalments to the Commissioner. These observations are contained in judgments which relate to the operation of sec. 221P, which was described in the first of those cases in 1963 by Menzies J. as ``an incredibly ill-drawn section'':
F.C. of T. v. Card (1963) 109 C.L.R. 177 at p. 194. Although it was not strictly necessary for the decision in Card's case (supra) (cf. the judgments of Dixon C.J. and Owen J.), Menzies J. referred to moneys deducted from employee's wages pursuant to the Division as
ATC 4213having been ``wrongly retained by the company'', which had ``gone to swell the company's assets'' but which the employer company ``had failed to pay over'': at p. 195. However, the essential finding in that case was that the liability of a liquidator, receiver or other trustee, into whose control the property of the employer had passed, was not personal but was confined to the property which had so passed. The Court did not hold that the tax deductions could be identified in a specific fund which had passed to such a trustee, for the section was one which did ``no more than require the `trustee' to discharge the liability out of the property of the employer which vests in him or passes under his control and, it may be, discharge that liability in priority to all other liabilities'': per Owen J. at p. 197. Moreover, in my opinion, the description of the payments by Menzies J. was metaphorical and in no way intended to suggest that there should be a specific retention by the company of each of the sums deducted from the employees' wages. He was merely justifying his conclusions by the obvious observation that an employer's failure to comply with the provisions of the Division ordinarily resulted in the employer's funds being greater than they ought to be because of his failure to pay the amount of the tax instalments to the Commissioner.
In a later case in which Card's case was distinguished in a manner not material to the present case, the High Court again made some observations relating to retention of the amount of deductions. Gibbs J. cited with approval the passages I have referred to earlier in the judgment of Menzies J.:
F.C. of T. v. Barnes 75 ATC 4262 at p. 4272; (1975) 133 C.L.R. 483 at p. 500. In the joint judgment of Barwick C.J., Mason and Jacobs JJ. in 75 ATC at p. 4267; 133 C.L.R. at pp. 493-494 it was stated:
``Secondly, and very importantly, sec. 221P is directed to employers who retain tax payable by employees to the Commissioner and then default in passing the moneys on to the Crown. Where the whole of the property of a defaulting employer vests in or passes under the control of a trustee, that property necessarily includes some property in some form which would not exist in the hands of the employer if, having made the deductions under sec. 221C, he had not retained them in his own hands. The amount of the deductions may be identifiable or may be unidentifiable in his hands. It does not matter. In the first case, the identifiable deductions should have been handed over. In the second case, the deductions are represented by property which the employer would have had to realise in order to pay over the deductions to the Commissioner of Taxation or would not have been able to purchase if he had paid the deductions over. The divesting or passing of control may be wholly subsequent to the obligation under sec. 221F or pursuant to an agreement in anticipation of such an obligation; but in either case the real effect of such a divesting or passing of control is that in a pool of all the property of an employer, including property which would not be so included if the deductions had been paid over, priority in payment thereout is given to a creditor or creditors selected by the employer.''
Again I see nothing in those observations which indicates that retention is an essential part of the method of making deductions under the Division. No doubt the assumption was that ordinarily employers would retain moneys in order to pay their liability for instalments to the Commissioner. The reference to the fact that the deductions may be both identifiable and unidentifiable, however, suggests that the majority were well aware that no particular method of retention or dealing with the amount of deductions was required under the Division, and they were looking only to the practical consequences of a failure to pay group tax. Not dissimilar observations appear in
D.F.C. of T. v. Horsburgh & Anor 83 ATC 4823 at p. 4835; (1983) 2 V.L.R. 591 at p. 606 per Murphy J. and in the same case in the Full Court, 84 ATC 4501 at p. 4505; (1984) V.L.R. 773 at p. 779 per Anderson J. In particular, in the latter judgment there is a reference to the obligation of an employer to account for the moneys he has deducted which are described as ``in effect held in trust'' and ``virtually held in trust by the receiver''. In my opinion the learned judge there was drawing an analogy, for it is clear from his language that he was not holding that there was in fact a trust created: but cf. Ford and Lee: Principles of the Law of Trusts (1983) para. 126.
On the other hand some support may be drawn from
Hart & Ors v. Barnes 83 ATC 4077
ATC 4214at pp. 4084-4085; (1983) 2 V.L.R. 517 at p. 526 and
Waters & Anor v. Widdows & Anor 84 ATC 4921; (1984) V.L.R. 503 for my conclusion that sec. 221N is confined to cases where gross wages are paid to employees and that sec. 221P applies whether or not sums have been retained in respect of employees' tax instalments. In the latter case Nicholson J. (in 84 ATC at p. 4928; (1984) V.L.R. at p. 511) rejected an argument that sec. 221P did not apply where there had been merely a payment of the employee's net wages.
My conclusion is that the authorities do not compel me to hold that the word ``deduction'' in any sections of the Division requires the retention of the sums which have been deducted by the employer for group tax instalments. It follows that the defendant in the present case deducted such instalments when paying his employees their net wages during the relevant period and that there was, within the meaning of sec. 221P, a failure to deal with the amount so deducted in the manner required by the Division, notwithstanding the failure to set aside or retain the amounts so deducted. Whether or not he had identifiable or unidentifiable sums in his hands representing those deductions, he is liable to pay the amount of those deductions to the Commissioner in this action.
Further argument was addressed to me as to the onus of proof resting on the defendant in a case such as the present where the Commissioner's only evidence was the prima facie evidence stated in the certificate tendered pursuant to sec. 221R(2). In light of my conclusions on what I consider to be the admitted facts, I do not feel it necessary to express any conclusion as to whether the ultimate onus of proof rested on either the plaintiff or defendant.
For the reasons I have expressed, there shall be judgment for the plaintiff in respect of tax instalment deductions for the period March 1977 to September 1978 in the sum of $15,461.49 and for additional amounts payable pursuant to sec. 221F(10) of the Act for the period May 1977 to October 1978 in the sum of $1,216.70. Further, it was agreed that if judgment was entered in favour of the plaintiff the appropriate rate of interest pursuant to the Supreme Court Act should be taken to be 10% per annum and I therefore give further judgment for that interest in the sum of $10,750. On the question of costs, argument was addressed to me on the assumption that O. 65 r. 12 of the Rules of this Court might apply, but as the total amount recovered by the plaintiff exceeds $25,000, I order that his costs be taxed and when taxed paid by the defendant.