Chaker and Secretary, Department of Social Services (Social services second review)
[2020] AATA 3128
•25 August 2020
Chaker and Secretary, Department of Social Services (Social services second review) [2020] AATA 3128 (25 August 2020)
Division:GENERAL DIVISION
File Number(s): 2019/8323
Re:Wassim Omar Chaker
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Mr Chris Puplick AM, Senior Member
Date:25 August 2020
Place:Sydney
The decision under review is set aside and remitted to the Respondent for reconsideration in accordance with the Tribunal’s reasons for decision and the direction that the lump sum which forms the basis upon which the preclusion period is calculated be reduced by $95,100.00.
.........................[sgd]...........................................
Mr Chris Puplick AM, Senior Member
CATCHWORDS
SOCIAL SECURITY – Newstart allowance – application for payment – eligibility – lump sum compensation preclusion period – length of preclusion period – whether special circumstances exist to reduce preclusion period – meaning of special circumstances – financial hardship – applicant made payments towards their mortgage – whether home modifications justified – decision under review set aside and remitted
LEGISLATION
Social Security Act 1991 (Cth) ss 17, 1160, 1169, 1170, 1171, 1184K
Social Security Amendment Act 1988 (Cth)
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Balancio and Secretary, Department of Family and Community Services (2003) 74 ALD 204
Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Dranichnikov v Centrelink [2003] FCAFC 133
In the Marriage of Philippe (1997) 4 Fam LR 153
Gartside and Secretary, Department of Social Services (Social services second review) [2017] AATA 45
Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339
Jess v Scott and Others (1986) 70 ALR 185
Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 11
Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Lind and Secretary, Department of Social Services [2014] AATA 680
Perkich and Secretary, Department of Social Security (1997) 49 ALD 137
Re Beadle and Director General of Social Security (1984) 6 ALD 1
Riddell v Secretary, Department of Social Security (1993) FCA 261
Sams and Secretary, Department of Social Services (Social services second review) [2016] AATA 654
Secretary to the Department of Family & Community Services v Allen [2001] FCA 1160
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569
Tallon and Secretary, Department of Social Security (1988) 15 ALD 6
Thomas and Secretary, Department of Family and Community Services [2003] AATA 842
Troy Dean and Department of Education, Science and Training [2005] AATA 586Vernon William Black and Jeanette Agnes Black and Secretary, Department of Social Security [1994] AATA 291
SECONDARY MATERIALS
House of Representatives, Hansard, 13 April 1988
House of Representatives, Hansard, 19 June 1995
Social Security Guide
REASONS FOR DECISION
Mr Chris Puplick AM, Senior Member
25 August 2020
Background
Mr Wassim Chaker (the Applicant) has applied to the Tribunal for a review of a decision by the Social Services and Child Support Division of this Tribunal (AAT1) which upheld a decision of the Secretary of the Department of Social Services (as Chief Executive of Centrelink) (the Respondent) to reject his application for the Newstart Allowance (NSA). That decision was made by the AAT1 on 9 October 2019.
On 30 November 2018 the Applicant lodged his application for NSA and this was rejected by the Respondent on 17 February 2019. That initial rejection was affirmed by a departmental Authorised Review Officer (ARO) on 16 May 2019. It was that decision which was affirmed by the AAT1.
The basis of the rejection of the NSA was that the Applicant had received two lump sum payments by way of compensation for work-related injuries and, under the provisions of the Social Security Act 1991 (Cth) (the Act) he was thus “precluded” from receipt of any other payments from Centrelink for a specified period of time.
The Applicant lodged an appeal against the AAT1 decision on 16 December 2019 and the matter was heard in this Tribunal on 17 July 2020.
The hearing was conducted with all parties on the telephone as a result of the restrictions imposed on Tribunal operations resulting from the COVID-19 pandemic. The Applicant was assisted by an interpreter in the Arabic language and by his wife who did not require such assistance. Although less than ideal, the Tribunal is satisfied that the arrangements in place accorded procedural fairness to all parties.
The issues before the Tribunal
What the Tribunal must consider, having regard to the facts before it, is simply whether the Applicant is subject to a preclusion period in terms of being eligible to apply for NSA (or any other Centrelink payment) and if so, what is the length of that preclusion period.
The “preclusion” system
The preclusion system arises as a result of deliberate public policy which dates back to amendments made by the Social Security Amendment Act 1988 (Cth), which introduced the concept that social security payments might be affected in a particular way where individuals were in receipt of lump sum compensation payments. That Act further provided that:
“… for future personal injury settlements made by agreement or by consent order, 50% of lump sum compensation will be deemed to be in respect of economic loss”.[1]
[1] Minister’s Second Reading Speech, House of Representatives Hansard, 13 April 1988 page 1497.
This principle was made more explicit as outlined by the Parliamentary Secretary in her Second Reading speech on the Social Security Legislation Amendment Bill (No 1) 1995 where she stated:
“The compensation recovery provisions of the act protect the social security system from ‘double dippers’, that is, those who might receive social security payments, as well as compensation, for the same period”.[2]
[2] House of Representatives, Hansard, 19 June 1995 page 1766.
Thus, where a person has income by way of compensation payments, either on a regular basis or in the form of lump-sum payment(s) they are not entitled to payment of social security benefits for a period which is calculated using a formula set out in the Act. They are not entitled to (precluded from) payment from two sources at the same time.[3]
[3] Secretary to the Department of Family & Community Services v Allen [2001] FCA 1160.
It is not necessary to go into the formula for calculating that preclusion period in detail.[4] Suffice to say what occurs is that:
(a)the total lump sum paid to a person is established
(b)the “compensation” part of the lump sum is taken to be 50% of that amount
(c)the date when the payment is made is established
(d)then a formula (section 17(8) of the Act) is applied which adds the maximum basic pension rate to the pension supplement component and the energy supplement component, multiplies this by a factor of 2 and then divides it by the ordinary free area limit (each term being elsewhere defined). The whole is then divided by 52
(e)this calculation gives a figure which is called the “income cut-out amount”
(f)the “compensation” part of the lump sum is then divided by the “income cut-out amount” to give a result which is rounded down to the nearest whole number
(g)that number is then expressed in weeks; and
(h)the “preclusion period” is then established as commencing on the date upon which the compensation payment was received and ending on the date which is the number of weeks thereafter established by the above process.
[4] Social Security Act 1991 (Cth) ss 17, 1160, 1169, 1170.
In the case of the Applicant, he received two compensation payments. The first of these on 4 November 2016 totalling $96,800.00 and the second, which was released to him on 20 January 2018 in the amount of $387,500.00. Under section 1171 of the Act these two figures were combined to give a total payment of $484,300.00.[5]
[5] The Tribunal notes details from the ARO Notes to the effect that the Applicant actually received payment of some $307,000.00 clear after deductions for legal costs ($75,000) and Medicare repayment ($5,000) out of the awarded sum of $387,500.00. See Section 37 Tribunal Documents (T-Docs) at [143].
Applying the formula outlined above at paragraph [10], the compensation part of the payment was calculated to be $242,150.00 (being 50% of the total) and when the rest of the formula was applied, the income cut-out amount was established to be $978.40 per week. Then $242,150.00 was divided by $978.40 and rounded down to give a figure of 247 (weeks). A calculation was then made that as the first date of payment to the Applicant was 19 January 2018,[6] the period of 247 weeks added to that took him up to 13 October 2022.
[6] The Applicant was on Newstart Allowance at the time and this was the day following the last of his periodic payments. The Applicant applied for NSA on 5 June 2014 (Respondent’s Statement of Facts, Issues & Contentions (SFIC)) although it is not clear when any payments were made to him.
In other words, the “preclusion” period was determined to exist from 19 January 2018 to 13 October 2022 during which time the Applicant was not entitled to receive any income support payments from Centrelink.
Centrelink became aware that the Applicant had been injured at work on 8 July 2014 and that his claim for compensation was being assessed. The Applicant was then warned on 24 February 2015 by way of a letter from Centrelink that:
“If you receive any payment of weekly compensation or a lump sum compensation payment, some or all of the Centrelink payments paid to you and your partner since the date of injury may have to be paid back.
Any compensation you receive may also stop you from receiving Centrelink payments in the future”.[7]
[7] T-Docs at [34].
Once the Applicant was awarded compensation, Centrelink wrote again on 23 January 2018:
“We are writing to let you know about the effect your lump sum compensation payment has had on your eligibility for future income support payments from us.
We have been advised that you are entitled to receive a lump sum compensation payment of $387,500.00. As a result, we have calculated that you have a preclusion period that starts on 19 January 2018 and ends on 13 October 2022. During this period you are not able to receive income support from us”.[8]
[8] Ibid at [45].
The Applicant was advised that his NSA had been cancelled from 19 January 2018. Despite this, the Applicant applied for NSA on 30 November 2018 and so Centrelink wrote again on 17 February 2019:
“We cannot pay you Newstart Allowance because you are not entitled for payment until 21 October 2022. Please claim again about 2 weeks before this date”.[9]
[9] Ibid at [87].
The legislation is clear and unambiguous in this respect. Once a preclusion period is established, for as long as the preclusion period lasts a person is not eligible to receive benefits such as NSA from Centrelink.
Disregarding the determination
However, as with all matters under the Act, things are never that simple.
Section 1184K(1) of the Act provides a mechanism whereby the strict application of the legislation may be varied in the event that its enforcement would lead to a result which is manifestly unfair or inappropriate in the individual circumstances of any case. It states:
Secretary may disregard some payments
(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
This section has been described by the Federal Court as “a release valve for such unfairness or injustice in certain circumstances”.[10]
[10] Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 11 at [28].
The Applicant’s circumstances
Basically, the Applicant states that he has no money left from the compensation payment and that, as a result he is financially destitute. Hence, he needs support from Centrelink notwithstanding the existence of the preclusion period.
This results from a series of financial decisions which he made about how to spend the money which he received. In particular, he spent significant sums on two items,[11] namely:
(a)making renovations to his home at a cost of $146,000; and
(b)paying off a substantial part of the mortgage on his home in the sum of $223,992.21.
[11] T-Docs at [90] and [93] respectively.
In relation to the home renovations the Applicant claims that these were necessary to modify his living spaces to accommodate the disabilities he suffered as a result of the original compensable accident.[12] Moreover, they were in accordance with the advice which he received from his medial practitioner, Dr Nabil Sarian.[13]
[12] Applicant’s letter to the Tribunal dated 27 March 2020.
[13] Bundle of materials filed by the Applicant.
The itemised list of this expenditure reveals that a number of the works undertaken cannot be ascribed directly to anything which might have been needed to accommodate various disabilities. For example, there are items for fencing ($18,000), painting ($7,000), roof tiles ($14,000) and wardrobes ($6,000) which might fall into this category.
There is no doubt that the Applicant suffers from a number of physical and mental health issues, although the full extent to which they manifest themselves as disabilities which need to be managed in daily living is not obvious. Both the Applicant and his wife were unable to outline these to the Tribunal when invited to do so.
The payment of some $224,000 to discharge part of the Applicant’s mortgage took place on 15 May 2018. This was after the Applicant had received the letters of 24 February 2015 and 23 January 2018 which put him on notice about expenditure and preclusion period matters (and advised that his NSA was cancelled). More to the point, there is a file note in Centrelink’s records dated 6 February 2018 as follows:
“Ptr [partner] asked what happens if they use the money towards mortgage and doing up the house. I advised we cannot tell someone what to do with their money but a/n and ptr will need to take into account when spending any of the lump sum that a/n will need to support himself until the end of the preclusion period”.[14]
[14] T-Docs at [184].
In other words, nearly half (46.2%) of the compensation payment monies were paid in one lump-sum to reduce the Applicant’s mortgage.
In evidence the Applicant’s partner (wife) told the Tribunal that she advised against this course of action and in his own statement of 27 March 2020 he writes that:
“Because I had psychological problems including anxiety and depression and unable to work full-time anymore and I was anxious about the mortgage repayments so I was not thinking clearly and at the time I thought it was best to put the balance of the money on further mortgage payments and I still have to pay about $50,000[15] on the mortgage and I am struggling with financial hardship now”.[16]
[15] Statement from Suncorp indicates balance at 19 February 2019 of $48,845.88, T-Docs at [122].
[16] Applicant’s letter to the Tribunal dated 27 March 2020.
It was stated in evidence that current mortgage repayments are being made by Mrs Chaker out of her social security income at a rate of $300 per fortnight.[17]
[17] Respondent’s SFIC at [75].
First question: is the Applicant’s NSA application subject to a preclusion period?
As with so many key concepts in the Act, the term “special circumstances” is not given any precise definition. Without going into extensive detail, it can be said that the courts have identified a number of factors which go to establishing whether or not “special circumstances” exist. They must be:
(a)Something more than ordinary or usual[18]
(b)Markedly different from the usual run of cases – not necessarily unique but having a particular quality of unusualness[19]
(c)Somehow distinguishing from usual cases of an analogous nature[20]
(d)Attuned to the individual circumstances of each case[21]
(e)Not so rigidly applied as to risk harsh or unreasonable outcomes[22]
(f)Involving “facts peculiar to the particular case which set it apart from other cases”[23]
(g)Supportive of the overall integrity of the social security system and recognising the public interest in ensuring that public moneys are recovered where they can and should be.[24]
[18] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; Jess v Scott and Others (1986) 70 ALR 185.
[19] Re Beadle and Director General of Social Security (1984) 6 ALD 1 at [3].
[20] Dranichnikov v Centrelink [2003] FCAFC 133.
[21] Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114.
[22] Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
[23] In the Marriage of Philippe (1997) 4 Fam LR 153 per Kay J.
[24] Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569; Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114, Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
Many applicants pleading special circumstances will find themselves in circumstances of financial hardship. However, in Gartside[25] the Tribunal made it clear:
I do not understand the many Federal Court and Tribunal decisions on “special circumstances” to require the Tribunal to find that special circumstances exist simply because the Applicant is in straitened financial circumstances. My understanding of the law is that it is open for the Tribunal to find special circumstances in such a circumstance, but a Tribunal Member is not obliged to do so. In exercising the discretion vested in the Tribunal, a Member is required to consider all of the matters the evidence admitted produces and straitened financial circumstances is one factor, albeit a very important one, but not the sole one. As Sheppard J said in Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 at 321:
“The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common; they will be impecunious and in straitened circumstances. Very often their stories will be quite tragic.”
[25] Gartside and Secretary, Department of Social Services (Social services second review) [2017] AATA 45 at [57].
The Social Security Guide (the Guide) which Centrelink publishes to give guidance to decision-makers in interpreting the provisions of the Act gives (at 4.13.4.20) some indication of the non-exhaustive factors which should be taken into consideration in determining whether special circumstances exist in cases such as this. They include:
(a)ill health, emotional state and decision-making capacity
(b)financial circumstances
(c)insufficient or incorrect legal advice or the unjust operation of legislative provisions; and
(d)changed circumstances.
Furthermore, the Guide states that general principles to be considered include that the:
(a)state of ill health should be more severe than the majority of DSP recipients; and
(b)injury that a person received compensation for cannot generally be regarded as a special circumstance.[26]
[26] Respondent’s SFIC at [56].
There is nothing in the material before the Tribunal to suggest that the Applicant’s state of ill health is in any way more severe than the majority of DSP recipients, although that itself is an undefined term. The reports of his physical state of health reveal damage to his right shoulder, arm and wrist (resulting from the accident), problems with his cervical and lumbar discs and blood clots in his lungs.[27] His psychologist reports a diagnosis of major depressive disorder, generalised anxiety disorder and post-traumatic stress disorder. However, he concludes that the Applicant “presents with moderate self-care, well-groomed and dressed in clean casual clothing” and that “His insight and judgement is fair”.[28]
[27] T-Docs at [65]; [168]-[173]; Bundle of materials filed by the Applicant.
[28] Mr Mustafa Alameddine report (8 August 2019), T-Docs at [173].
In Balancio the Tribunal accepted that there was evidence that the applicant was suffering from a major depressive disorder such that it “affected her capacity to fully understand the obligations required of her”[29] and hence, special circumstances were found to exist.
[29] Balancio and Secretary, Department of Family and Community Services (2003) 74 ALD 204 at [33]. See also Perkich and Secretary, Department of Social Security (1997) 49 ALD 137 at [62] and the authorities considered in Troy Dean and Department of Education, Science and Training [2005] AATA 586 at [60].
In this instance, the Tribunal cannot find that there are any special circumstances arising directly from the Applicant’s state of physical or mental health which would justify setting aside the preclusion period requirements in full. Given the conclusions of Mr Alameddine as to the Applicant’s level of insight and judgement; the clear warnings from the Respondent about the need to ensure that the compensation payment was managed in such a way as to cover expenses during the preclusion period; and the testimony of his wife that she advised against expenditure by way of mortgage reduction, it does not accept that the decision to spend nearly half of his available resources on one item, which did not need to be addressed as a matter of urgency or necessity, should be accepted as a special circumstance for the purposes of section 1184K of the Act.
The Tribunal has given consideration on a number of occasions to the way in which expenditure of monies received as compensation payments have resulted in financial hardship for individuals.
In Groom the Tribunal found that the applicant’s “circumstances are entirely of his own making and occurred despite him having received legal advice of the preclusion period and its consequences”.[30]
[30] Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339 at [62].
In Sams, Deputy President J W Constance noted that if the applicant had “been more careful in managing her finances then Mrs Sams’ present financial hardship could have been prevented”.[31]
[31] Sams and Secretary, Department of Social Services (Social services second review) [2016] AATA 654 at [40].
The Tribunal has always accepted that “the circumstances leading to such hardship are not irrelevant”[32] nor is consideration of the degree of hardship.[33] Further, “special circumstances must be considered from a holistic perspective, and whilst each consideration in itself may not be enough to evoke the special circumstances discretion, when viewed as a whole a person’s circumstances may well be special”.[34]
[32] Vernon William Black and Jeanette Agnes Black and Secretary, Department of Social Security [1994] AATA 291 at [50].
[33] Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 at [39].
[34] Lind and Secretary, Department of Social Services [2014] AATA 680 at [48].
The Tribunal also recognises that “hardship is hardship, even if it is self-inflicted”[35] and that “even the foolish and the profligate must be protected in appropriate circumstances through the exercise of the discretion embodied in s 1184”.[36]
[35] Tallon and Secretary, Department of Social Security (1988) 15 ALD 6 at [8].
[36] Thomas and Secretary, Department of Family and Community Services [2003] AATA 842 at [16].
However in this instance, the evidence is that the Applicant decided to spend a significant sum on the repayment of part of his mortgage, not as some act of folly or because of an inability to make rational judgments but because, as he obviously told Mr Alameddine, he wanted “to secure stable accommodation for his wife and children because he was worried about the safety and security of his family”[37] and he determined that the best way to do this was to enhance the equity in his own home to the benefit of the whole family.
[37] T-Docs at [173].
Given this, the Tribunal also accepts that it is not a viable option for the Applicant to be forced to sell his home, thereby forgoing the benefits of the modifications made to accommodate his disabilities and jeopardizing the welfare of himself, his wife and his four minor children.
There is little doubt that the Applicant and his family are suffering a degree of financial hardship, however this is not an unusual or special circumstance for persons on welfare benefits. Mrs Chaker receives $1,829.02 per fortnight from a variety of benefits.[38] The details of family expenditure provided indicate that this income is sufficient to cover their costs[39] in a way which places them on par with most social security recipients.
[38] Pension ($711.80), Family Assistance ($985.32) and Carers’ Allowance ($131.90), Respondent’s SFIC at [77].
[39] T-Docs at [174]-[178].
Indeed, they are in a better position than many given the degree of equity in the family home and the increasing value of that home due to both market forces and the home improvements which they have made.
Conclusion as to first question
There is nothing before the Tribunal to demonstrate that there are any special circumstances in this case, which cause it to be distinguished from any others which present in similar circumstances or conditions in terms of the establishment of a preclusion period and hence the exclusion of the Applicant for the immediate payment of NSA.
Second question: are there any grounds to modify the preclusion period?
In Riddell the Federal Court opined:
Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other.[40]
[40] Riddell v Secretary, Department of Social Security (1993) FCA 261 at [23].
A similar point about the need for a balance between “the needs for certainty of application (of social security law) and flexibility of response to the situation that may arise from time to time” was stressed in Hales.[41]
[41] Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at [155].
There are two matters which this Tribunal considers should be taken into account in this instance. The first of these is that the Applicant did not receive the full amount of the compensation payment of $387,500.00; rather, he received some $307,000.000 which was realistically available to him to cover his living expenses during any automatic preclusion period. This is $80,500.000 less than the amount used to make the original preclusion calculations, to which was added the earlier payment of $96,800.00.
It is unrealistic to calculate the Applicant’s capacity to manage financially by using a level of payment which was not received by the Applicant. The deductions from his payment were front-end and were payments over which he had no control. His starting point was not at the level calculated by the Respondent in determining the preclusion period.
Secondly it is appropriate that when a person has suffered significant physical injury as a result of a compensable accident some allowance should be made for them to modify their home living conditions to accommodate a response to any resultant disabilities. It is not possible to distinguish exactly what costs were incurred directly in terms of making necessary disability-related modifications to the Applicant’s premises.[42] In this case the Applicant has claimed $146,000.00 and the Tribunal has made a notional allowance covering 10% of those claimed costs (being $14,600.00).
[42] T-Docs at [90] and Applicant’s letter to the Tribunal dated 27 March 2020.
It is unrealistic to expect that where an applicant has suffered major injuries for which they have been compensated some allowance should not be made (by discounting it from the preclusion calculations) to allow expenditure necessary for them to lead a life in which the impact of their disabilities is ameliorated, reduced or minimised.
Conclusion as to second question
The Tribunal finds that while the Applicant is subject to a preclusion period in respect of his application for NSA, it believes that the preclusion period should be recalculated on the basis that, with reference to the figures outlined above:
·the lump sum which forms the basis upon which the preclusion period is calculated should be reduced by $95,100.00 (i.e. that amount should be treated as not having been made to the Applicant: section 1184K).
The Applicant must understand that this decision means that they are still not eligible to apply for NSA but the period during which this preclusion will operate will be recalculated by the Respondent and will be reduced. The Tribunal is not in a position to calculate what that new date might be but relies upon the Respondent to make those calculations in line with the provisions of the Act.
DECISION
The decision under review is set aside and remitted to the Respondent for reconsideration in accordance with the Tribunal’s reasons for decision and the direction that the lump sum which forms the basis upon which the preclusion period is calculated be reduced by $95,100.00.
I certify that the preceding 55 (fifty-five) paragraphs are a true copy of the reasons for the decision herein of Mr Chris Puplick AM, Senior Member
...........................[sgd]..........................................
Associate
Dated: 25 August 2020
Date of hearing: 17 July 2020 Advocate for the Applicant: Mrs G Chaker Solicitors for the Respondent: Mr R Alam, Services Australia
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