Contek Pty Ltd v Mossop Group Pty Ltd (No 2)
[2024] SADC 163
•13 December 2024
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CONTEK PTY LTD v MOSSOP GROUP PTY LTD (NO 2)
[2024] SADC 163
Judgment of her Honour Judge Thomas
13 December 2024
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - JUDGMENTS AND ORDERS - GENERALLY - FORM OF JUDGMENT OR ORDER
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - JUDGMENTS AND ORDERS – INTEREST ON JUDGMENTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS
The parties disagree on the form of judgment to be finally entered, the calculation of interest and the orders to be made as to costs in the circumstances of this case.
The applicant’s pleaded claim was for the total of the net unpaid balance of the contract sums due under two subcontracts after adjustment for disputed variation and back charge claims in circumstances where the respondent disputed and approved some variation claims and set off back charge claims against unpaid approved claims, alleging no further amount was owed to the applicant under either of the relevant subcontracts. At trial, some further concessions were made by the respondent and some claims withdrawn by both parties to an equal value. The Court was asked to determine discrete disputed variation and back charge claims. Whilst the applicant was successful overall, the respondent succeeded on some disputed claims and the respondent had paid monies into court that were substantially less than the outcome of the trial.
The applicant seeks entry of a judgment sum for the full amount of the outstanding adjusted contract sums for each project comprising undisputed and disputed unpaid items and pre-judgment interest at the rate of 5%, adjusted for security retention during the relevant defect liability periods. The respondent contends judgment should be limited to the disputed items determined by the Court and interest calculated on the that limited basis.
As to costs, the applicant seeks its costs of action on an indemnity basis from the commencement of the proceeding based on a series of informal and formal offers that were not accepted. The respondent submits UCR r 194.5(11) applies and the applicant is not entitled to its costs of action and if any orders as to costs are made, they should be made in its favour for the aborted first part of the trial.
Held:
(1) Judgment should be entered for the total of the unpaid contracts sums due to the applicant under the relevant subcontracts, comprising both disputed and undisputed unpaid amounts plus pre-judgment interest. The Court should look to the most appropriate remedy to vindicate the rights established by the successful party overall, so as to avoid a multiplicity of proceedings about the same issues. The unpaid undisputed items were pleaded, in issue and before the Court at trial. The dispute between the parties about the proper calculation of the adjusted contract sums under both subcontracts was deferred for further hearing after determination of the discrete variation and back charge claims.
(2) Pre-judgment interest should be calculated on the unpaid contract sum due under each subcontract and run from the date upon which it was reasonable for the respondent to have properly assessed the applicant’s variation claims and its back charges to the date judgment was pronounced and took effect (15 January 2024), adjusting for security retention during the relevant defect liability period.
(3) There was no basis established to defer the start of the period during which interest should run by reason of the way in which the applicant ran its case.
(4) The final judgment sum including pre-judgment interest is calculated as $194,605.65 including GST comprising principal of $148,677.69 including GST and pre-judgment interest of $45,928.16.
(5) As to costs, UCR r 194.5(11) does not apply. Having regard to all the circumstances, whilst the applicant was successful overall, its costs of action should be reduced by 25% on account of the respondent’s success on discrete issues and claims. Under UCR r 132.10, having regard to the respondent’s failure to accepts the applicant’s formal offer made on 21 June 2021, the applicant is entitled to indemnity costs from the date of its expiry, 16 July 2021.
(6) Accordingly, the respondent should be ordered to pay 75% of the applicant’s costs of action on a standard costs basis until 16 July 2021 and thereafter on an indemnity costs basis. The monies paid into court by the respondent and interest should be paid to the applicant in partial satisfaction of the final judgment sum.
District Court Act 1991 (SA) ss 8(1), 39 & 40; District Court Civil Rules 2006 r 33; District Court Supplementary Rules (2014) (SA) r 8, 17 & 208; Supreme Court Act 1935 (SA) s 27; Uniform Civil Rules 2020 (SA) rr 69.5, 114.4, 132.4, 132.2(10), 132.(11), 182.2, 182.3 & 194.5(11); Uniform Civil (No 9) Amending Rules 2023, referred to.
Beaton v McDivitt (1985) 13 NSWLR 134; Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64; Excelsior Land Holdings Pty Ltd v Alan Sheppard Constructions Pty Ltd [2012] SASCFC 119; Fire & All Risk Insurance Co Ltd v Callinan (1978) 140 CLR 427; Grbavac v Hart [1997] 1 VR 154; Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97; Ramadan v ACN 098 408 176 Pty Ltd & Anor (No 3) [2024] SASCA 19; Roberts v Roberts (No 2) [2021] SASC 91, applied.
Contek Pty Ltd v Mossop Group Pty Ltd [2024] SADC 1, considered.
CONTEK PTY LTD v MOSSOP GROUP PTY LTD (NO 2)
[2024] SADC 163The Issues
The parties disagree as to the form of the judgment to be finally entered, the calculation of interest to be awarded to the successful applicant and the orders to be made as to costs in the circumstances of this case.
At the centre of their dispute is the calculation of the net amount due under the relevant subcontracts to the successful applicant Contek Pty Ltd (Contek) that remains unpaid by the respondent Mossop Group Pty Ltd (Mossop) and whether judgment should be entered for the total of both disputed and undisputed unpaid items. These issues bear directly on the form of the judgment to be finally entered, the principal sum for the purposes of calculating pre-judgment interest and consideration of Contek’s claim for costs to be awarded in its favour on an indemnity basis by reason of offers it made to settle the proceeding that were not accepted.
Judgment
On 15 January 2024 judgment was pronounced in Court and reasons delivered to the parties.[1] Judgment was entered[2] in favour of Contek against Mossop for the disputed items determined and summarised in Table 12 on page 104 of the Court’s reasons for judgment.
[1] Contek Pty Ltd v Mossop Group Pty Ltd [2024] SADC 1 (Contek v Mossop).
[2] FDN 102.
The quantum of Contek’s pleaded claims for payment of the full amount due under the two subcontracts was not directly addressed or determined in the Court’s judgment or reasons because the parties asked the Court to determine discrete disputes about variation and back charge claims. The parties were to be heard further as to any remaining disputes about the net amount due under the two subcontracts once the parties had the opportunity to consider the Court’s determination of the disputed items.[3]
[3] Contek v Mossop [572]-[574].
The proceeding was adjourned to a directions hearing to set a timetable for submissions as to the final form of the judgment, interest and costs.
The Court adopted this approach to facilitate a proportionate determination of the issues in dispute given the relatively low values in issue per claim in circumstances where the parties were unable to agree a common form of summary of the accounting for either project, despite there being substantial common ground as to most of the values. Both preferred their own summary, asserting there were errors in the other’s. In closing submissions, Contek relied on its aide memoire MFI A19 and Mossop relied on Tables 1 and 2 in Appendix 1 to its written closing submissions.[4]
[4] Ibid [12]-[14].
Regrettably, the parties have been unable to resolve their differences for the purposes of finalising the form of judgment, pre-judgment interest and costs.
The Net Amount Due Under the Subcontracts
The Form of the Judgment Issue
Contek seeks judgment be entered for the full amount outstanding under the two subcontracts. That is, amounts ultimately undisputed but unpaid and the unpaid disputed amounts determined by the Court.
Contek’s calculations of the total unpaid adjusted contract sums for each project are set out in the schedule (the Contek Summary) exhibited to its solicitor’s affidavit[5] relied on in support of its position as to the form of judgment, interest and costs. The total judgment sum claimed (before pre-judgment interest) is $150,085.65 including GST, comprising the following subtotals.
[5] Affidavit of Jason Rusch made on 17 May 2024 (FDN 108) (the Rusch Affidavit) Exhibit JR-1 pages 3 & 4. It is in a similar form to MFI A19, updated to take account of the Court’s determination of the disputed variation and back charge claims.
Contek’s Claimed Judgment Sum (Before Pre-judgment Interest)
10
11 Determined (inc GST)
12 Undisputed (inc GST)
13 Total (inc GST)
14 Lifecare project
15 $53,683.67
16 $65,898.14
17 $119,581.81[6]
18 Aldi project
19 $10,870.75
20 $19,633.09
21 $30,503.84[7]
22 Total (inc GST)
23 $64,554.42
24 $85,531.23
25 $150,085.65[8]
[6] Written Submissions (FDN 110) [3] and [4].
[7] Supplementary Written Submissions (FDN 113) [9].
[8] Ibid.
Mossop objects to judgment being entered for any amount other than the total of the disputed items determined by the Court for each project. That is, $53,683.67 including GST for the Lifecare project and $6,259.00[9] including GST for the Aldi project. It contends that the issue of the final adjusted contract sums was not before the Court at trial, there was no contest over the undisputed amounts and therefore the Court should not analyse what comprises those sums. Further, the Court should not presume there is an issue about the calculation of the adjusted contract sums or the amounts yet to be paid under the two subcontracts. Moreover, the relevant evidence as to the payments claims[10] was withdrawn and not considered by the Court.
[9] Mossop treats $4,611.75 of V03 for the Aldi project as paid and not disputed because it was paid into court even though it was an item determined.
[10] Ultimately, although tendered, Exhibit A2 (the folder for Topic 2 “Lifecare Payments”) and Exhibit A9, (the folder for Topic 9 “Aldi Berri payments”) were not relied on by the parties by the closing of the trial.
Mossop annexed to its written submission its financial summary of the differences between the parties, how the trial unfolded and the issue determined by the Court (Mossop’s Summary).
Contek’s Entitlement to Judgment
Mossop’s contentions should be rejected as unprincipled. Contek is entitled to judgment for the total of the unpaid contract sums for both the Lifecare and Aldi projects, comprising both disputed and undisputed amounts.
The primary reason is that there has always been a contest about payment of the undisputed amounts. They were not paid because Mossop has consistently claimed its back charges exceeded the undisputed unpaid amounts owed to Contek, whilst denying Contek has any entitlement to its variation claims. In May 2020, Mossop reassessed the variations and back charges in dispute for both projects and formally admitted in its penultimate pleading that it owed Contek $30,767.84 including GST ($27,970.76 plus GST).[11] Yet, Mossop did not pay this amount to Contek. Instead it paid this amount into Court on 27 April 2021,[12] maintaining its denial of any further liability to Contek and the contest over payment of what was the net due to Contek.[13]
[11] Exhibit A200 [19] and [20].
[12] FDN 40.
[13] Third Defence and Counterclaim (FDN 67) (Defence and Counterclaim) [22].
Under s 8(1) of the District Court Act 1991, this Court has the same power as is conferred on the Supreme Court by s 27 of the Supreme Court Act 1935 to grant all remedies to which a party shall be entitled for claims brought forward in the proceeding before it so that, as far as possible, all matters in controversy between the parties may be completely and finally determined. The policy intent is to avoid a multiplicity of proceedings about the same issues in the best interests of the parties and the public. Accordingly, in formulating the relief it grants, the Court should look to the most appropriate remedy to finally and cost-effectively vindicate the rights established by the successful party.[14]
[14] Beaton v McDivitt (1985) 13 NSWLR 134 at 159 per Young J (upheld on appeal).
Whilst the unsuccessful party’s right to procedural fairness is an important consideration informing the Court’s discretion on the relief to be granted, the parties have been afforded a full opportunity to be heard. Since judgment, they have both addressed the issues arising in two rounds of written submissions as well as by oral submissions.
A further consideration is that this is not a case whereby the successful party seeks relief for unpleaded matters. The issue of the unpaid outstanding sums due and payable under both subcontracts was plainly before the Court at trial. It was part of Contek’s pleaded case[15] to which Mossop joined issue in its defence and counterclaim from the outset.[16] Evidence was adduced as to both the disputed and undisputed components of the adjusted contract sums under both subcontracts. Both parties included in their closing submissions their respective analyses of the adjusted contract sums under both subcontracts, presenting their differing positions on the disputed variation and back charge claims.
[15] Third Statement of Claim (FDN 66) (Claim).
[16] Defence and Counterclaim.
Accordingly, as a matter of principle and in the interests of finality in litigation, Contek is entitled to have judgment entered for the total unpaid contract sums for both projects.
Calculation of the Judgment Sum
The judgment sum (before pre-judgment interest) should be the total of the unpaid adjusted contract sums for both the Lifecare and Aldi projects.
Save for the disputed items, the parties’ analyses in the Contek and Mossop Summaries can be fully reconciled to calculate the judgment sum. There is no evidentiary hiatus by reason of the admissions made in Mossop’s defence and the common figures used in the Contek and Mossop Summaries.
The calculations of the unpaid contract sums are set out in Annexures A and B to these reasons.
The starting point in calculating each unpaid contract sum is the undisputed original contract sum provided in each subcontract.[17]
[17] Claim [3.35] and Defence and Counterclaim [8.2]. Contek v Mossop [3] and [5].
The original contract sum in each case is then to be adjusted by the value of the undisputed and disputed determined variation and back charge claims to yield an adjusted contract sum from which the total amount paid is to be deducted.
The total amount paid by Mossop to Contek for each project is not disputed. It is the same figure in both the Contek and Mossop Summaries.
The disputed claims are set out in Tables 1 and 2 of the Court’s reasons for judgment and comprise undisputed and disputed amounts.[18] As already stated, the determined values for the disputed amounts of the disputed claims are set out in Table 12 of the reasons for judgment. The undisputed amounts of the disputed claims are also identified in the Court’s reasons for judgment in Table 1.
[18] Contek v Mossop [9] and [14].
These amounts reconcile to the amounts identified by Mossop in its penultimate pleading for disputed and undisputed amounts for Lifecare project variations.[19] For example, Lifecare variation claims 2, 6 and 8 were identified as partly paid and partly disputed. Lifecare variation claim 4 was identified as undisputed and fully paid. Undisputed variation and back charge claims are also identified in the parties’ pleadings. For example, undisputed Lifecare variation claims 10 to 17 (totalling $17,198.18 including GST) were identified in Mossop’s penultimate pleading and its trial pleading[20] as variation claims that were approved but not paid and set off against Mossop’s back charge claims.
[19] Exhibit A200 [7.14].
[20] Defence and Counterclaim [6.7] to [6.14].
There are six items that were settled at trial by the parties foregoing certain claims that are to be taken into account. These items appear in both the Contek and Mossop Summaries with ‘nil’ values.
The resulting judgment sum (before pre-judgment interest) is $148,677.49 including GST.
Determined Judgment Sum (Before Pre-judgment Interest)
Determined (inc GST)
Undisputed(inc GST)
Total (inc GST)
44 Lifecare project
45 $53,683.67
46 $65,898.14
47 $119,581.81
48 Aldi project
49 $10,870.75
50 $18,224.93
51 $29,095.68
52 Total (inc GST)
53 $64,554.42
54 $84,123.07
55 $148,677.49
Pre-Judgment Interest
Contek claimed interest as part of its claim. [21]
[21] Claim, prayer for relief [I].
Pursuant to s 39 of the District Court Act 1991, Contek, as the party in whose favour a monetary judgment is to be granted, is entitled to an award of interest for the whole or part of the amount for which judgment will be given, unless good cause is shown to the contrary. Interest is payable at a rate, and for a period as determined by the Court. For a liquidated claim, the period should run from the date the liability to pay the claim fell due.[22]
[22] District Court Act 1991 (SA) (District Court Act) s 39(2)(b).
Section 39 confers a broad discretion on the Court in fixing pre-judgment interest that must be exercised on a principled basis,[23] bearing in mind that the function of the award of interest is to compensate a successful applicant for the loss or detriment suffered by being kept out of its money during the relevant period.[24] Interest is not awarded on the basis of the use the respondent has had of the money or as punishment.
[23] Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64 at [531].
[24] MBP (SA) Pty Ltd Pty Ltd v Gogic (1991) 171 CLR 657 at 663.
It follows that in awarding damages the Court must bear in mind that the object of the award is to restore an applicant to the situation, so far as money can, in which the applicant would have been but for the respondent’s wrongful conduct. [25] Whilst the established approach is to deal with interest in a fairly broad-brush fashion, due regard should be given to the manifestation and duration of the loss or detriment in question in any case. The conduct of the parties at trial may be a relevant consideration.
[25] Fire & All Risks Insurance Co Ltd v Callinan (1978) 140 CLR 427 at 433.
The Issues
Contek claims interest on the unpaid contract sum for each project at the rate of 5% per annum from the alleged dates of completion and making of the variation claims, allowing an adjustment for security retention of 2.5% on the adjusted contract sums for the 12 month defects liability period in each case. For the Lifecare project, Contek claims interest from 17 June 2017 and, for the Aldi project, from 28 June 2016.
Mossop accepts the 5% interest rate is appropriate but contends interest should only run from 1 March 2022 onwards. Before then, interest rates were at historic lows and Mossop contends it is relevant and an important consideration that Contek did not properly prepare its claim until 1 March 2022.
Is there any basis for reducing the period of interest as Mossop contends?
None has been established. Contek has been kept out of its money since Mossop assessed and rejected its variation claims and claimed back charges against which it set off amounts it otherwise accepted as payable under the subcontracts but did not pay. It is significant that Mossop’s assessment of monetary claims for variations to the contract works was part of a contractual process undertaken under the relevant subcontracts.
Whilst the Court must be astute to ensure the applicant is not over-compensated, the Court’s discretion as to interest should not become an investigation into the history of the dispute pre-litigation and the interlocutory steps. Artificial arguments should be avoided and a pragmatic approach taken to identifying the real detriment suffered by the applicant in the relevant circumstances.[26]
[26] Ramadan v ACN 098 408 176 Pty Ltd & Anor (No 3) [2024] SASCA 19 at [17].
In this regard, Mossop places undue emphasis on the matters raised in its written submissions about the evolution of the dispute, the issues and the way in which the trial ran. None disentitle Contek to compensation for not being paid the amounts that were ultimately determined as should have been paid had Mossop properly assessed Contek’s payment claims at the relevant times under the relevant subcontracts.
Specifically, there is no substance to the complaint that Mossop did not have fair notice of the substance of Contek’s claims from its initial pleadings. Mossop well knew what the dispute was about and the case it had to meet for each variation and back charge claim in dispute. It should be emphasised that the dispute arose from Mossop’s assessment and rejection of Contek’s variation claims and Mossop’s asserted back charges that it then set off against variation claims made by Contek it had otherwise approved.
Mossop re-assessed the Lifecare variation claims in September 2017 and February and October 2018. In May 2020 Mossop again reassessed both the Lifecare and Aldi claims, maintaining throughout its own analysis of what was owed and unpaid. Mossop paid the monies it admitted it owed Contek ($30,767.84) into court on 27 April 2021.[27] Mossop is a sophisticated litigant and was legally represented throughout the proceeding.
[27] Notice of Payment into Court (FDN 40).
Mossop was ultimately unsuccessful overall in defending Contek’s claims for disputed variation claims and in prosecuting its back charge claims, with the effect that Contek should now be compensated for not being paid the net amount due under the two subcontracts when its claims for payment have been vindicated at trial. The outcome substantially exceeds the monies paid into court.
Contek’s late change of its pleaded position on the extra steel variation claims does not disentitle it to interest prior to this amendment. These claims were one of many issues in dispute and Mossop well knew the circumstances in which Contek’s tender price was negotiated and the drawings upon which it priced its concrete works. In any event, the only prejudice caused by Contek’s late amendment is as to costs, a prejudice automatically addressed under the rules. Under r 69.5 of the Uniform Civil Rules 2020 (SA) (UCR), Mossop is entitled the costs thrown away by reason of Contek’s late amendment made during the November 2021 part of the trial on a standard costs basis. Costs thrown away would include the two and half days of trial and any duplication arising from preparing twice for trial.
From when should interest run?
The real issue arising is from when interest should run for the amount due under each subcontract, given Contek’s variation claims were made progressively, and in some cases, reissued and proper substantiation was only provided later than the initial claim was made. Under the relevant subcontracts, Mossop was contractually entitled to seek further information and substantiation of Contek’s claim. Contek’s entitlement to payment cannot arise any earlier than Mossop’s assessment of a properly substantiated claim.
Adopting a broad and impressionistic approach, interest for the Lifecare project should run from 18 October 2017 on the unpaid contract sum, after allowing for cash retention of 2.5% of the adjusted contract sum during the defects liability period.
This is the date when it was reasonable for Mossop to have properly assessed Contek’s variation claims, as is shown by events relevant to the Lifecare project.
Concrete works were carried out in late 2016 and 2017.[28] Revised claims for the extra concrete variation were made on 14 July 2017[29] and the Hanson delivery dockets were only provided to Mossop in August 2017. They were the best and fullest evidence of the concrete used.[30] Further information substantiating the steel variation claims was provided on 29 September 2017.[31] Mossop re-assessed and approved the outstanding Lifecare variation claims on 18 October 2017.[32] Whilst the successful back charge claims were not invoiced until August 2018,[33] the underlying disputes about Contek’s defective works had arisen in late 2017, with other subcontractors, Patch & Caulk and Arrunga carrying out remedial works in October 2017 and January 2018, respectively.[34] The date of 18 October 2017 is fair and reasonable starting point for when interest should run.
[28] Contek v Mossop [4].
[29] Ibid [124].
[30] Ibid [132] and [330].
[31] Ibid [341].
[32] Ibid [345].
[33] Exhibit A7 pages 71, 72 and 177.
[34] Contek v Mossop [467] and [495].
Adopting the same approach for the Aldi project, it is appropriate that interest runs from the date claimed by Contek, 28 June 2016.
The variation claim for cast-in angles was submitted on 10 March 2016[35] and assessed and rejected by Mossop in a subsequent payment schedule. The works were due for completion in accordance with the subcontract program on 17 May 2016[36] and reached substantial (or practical) completion on 7 June 2016.[37] A date in late June 2016 is therefore a reasonable approximation of the time when Contek should have been paid for its variation claims if they had been properly assessed.
[35] Ibid [526].
[36] Exhibit A8 page 49.
[37] Exhibit A9 page 62.
To when should interest run?
Under r 182.2 of the UCR, unless the Court otherwise orders, a judgment takes effect at the end of the hearing where judgment was pronounced orally in Court. Therefore, pre-judgment interest should run to 15 January 2024 and thereafter, a claim for post-judgment interest arises under s 40 of the District Court Act.
What adjustment should be made for cash retention?
Under each subcontract, Mossop was entitled to security in the form of cash retention of 5% of the adjusted contract sum as assessed and paid until the date of substantial completion and 2.5% during the 12 month defects liability period.[38] It follows that interest should not run on the 2.5% cash retention Mossop was entitled to hold during the defects liability period for each project.
[38] Exhibit A1 pages 184, 185 and 194; Exhibit A8 pages 7, 8 and 17: 5% of subcontract sum ([email protected]%).
For the Lifecare project, the precise date substantial completion was reached and thus the duration of the defects liability period are not known. On the evidence, the works were substantially completed by about September 2017 and the parties were in dispute about variation claims and back charges for defective works. It is fair and reasonable to adopt the date of Mossop’s assessment of Contek’s claims being 18 October 2017 as the start of the defects liability period for the purposes of making an adjustment for 2.5% cash retention in calculating pre-judgment interest.
The 2.5% cash retention for the Lifecare project is $29,586.80.[39]
[39] See Annexure A.
For the Aldi project, it is fair and reasonable that the date of 28 June 2016 be adopted as the start of the defects liability period for the purposes of making an adjustment for 2.5% cash retention in calculating pre-judgment interest.
The 2.5% cash retention for the Aldi project is $14,137.81.[40]
[40] See Annexure B.
Should an adjustment be made for the payment of monies into court?
No. The short point is that despite the concessions made by Mossop in its Second Defence and Counterclaim[41] and subsequent payment of monies into Court, Contek was still held out of substantially more monies than were paid into court. There is no good reason why Mossop did not pay the monies paid into court directly to Contek. In any event, it is appropriate to not further complicate the calculation of interest and apply the monies paid into court in part satisfaction of the final judgment sum as discussed below.
[41] Exhibit A200 [19] and [20].
What is an appropriate interest rate?
It is appropriate to adopt an interest rate of 5% per annum for the whole of the relevant periods.
Whilst the appropriate rate is a matter for the Court to determine in each case, as a guide, UCR r 182.3 provides the Court may calculate the interest payable at the rate of 5% per annum until 3 July 2023 when the rate was increased to 7% per annum.[42] Contek is content with a rate of 5%. Taking a broad brush approach, it is reasonable to adopt 5% from 3 July 2023 to 15 January 2024 because it is a relatively short period by comparison to the whole of the relevant periods.
[42] Uniform Civil (No 9) Amending Rules 2023.
UCR r 182.3 applies from 18 May 2020.
Before the UCR, r 208 of the District Court Civil Supplementary Rules 2014 (SA) provided that, as a guide, the Court may calculate the interest payable at the Reserve Bank of Australia cash rate plus 4 per cent.[43] The relevant cash rates plus 4 % fluctuated from 5.5% to 4.75% during the relevant period.[44] A rate of 5% across the relevant periods before 18 May 2020 is a fair and reasonable approximation of these rates.
[43] With the rate to be determined for each six month period beginning on 1 January or 1 July by reference to the last cash rate set prior to that date plus 4 percent.
[44] Between June and 3 August 2016, the cash rate was 1.75%. From 3 August 2016 until 5 June 2019, the cash rate was 1.5%. Between 5 June and 4 September 2019, the cash rate was 1%, falling to 0.75% on 4 March 2020 and 0.25% on 20 March 2020.
What interest should be awarded?
Applying a rate of 5% per annum to the unpaid contract sums for each project for the periods determined and adjusting for cash retention for the defects liability period results in an award of pre-judgment interest calculated to 15 January 2024 as follows.
87 Lifecare project
88 Period
89 Principal
90 Interest
91 18-Oct-17
92 17-Oct-18
$ 87,036.33 [45]
93 $ 4,351.82
94 18-Oct-18
95 17-Oct-19
$ 119,581.81
96 $ 5,979.09
97 18-Oct-19
98 17-Oct-20
$ 119,581.81
99 $ 5,979.09
100 18-Oct-20
101 17-Oct-21
$ 119,581.81
102 $ 5,979.09
103 18-Oct-21
104 17-Oct-22
$ 119,581.81
105 $ 5,979.09
106 18-Oct-22
107 17-Oct-23
$ 119,581.81
108 $ 5,979.09
109 18-Oct-23
110 15-Jan-24
$ 119,581.81
111 $ 1,457.92
112
113
114 Total Interest
115 $ 35,705.18
116 Aldi project
117 Period
118 Principal
119 Interest
120 28-Jun-16
121 27-Jun-17
$ 13,544.09[46]
122 $ 677.20
123 28-Jun-17
124 27-Jun-18
$ 29,095.68
125 $ 1,454.78
126 28-Jun-18
127 27-Jun-19
$ 29,095.68
128 $ 1,454.78
129 28-Jun-19
130 27-Jun-20
$ 29,095.68
131 $ 1,454.78
132 28-Jun-20
133 27-Jun-21
$ 29,095.68
134 $ 1,454.78
135 28-Jun-21
136 27-Jun-22
$ 29,095.68
137 $ 1,454.78
138 28-Jun-22
139 27-Jun-23
$ 29,095.68
140 $ 1,454.78
141 28-Jun-23
142 15-Jan-24
$ 29,095.68
143 $ 817.07
144
145
146 Total Interest
147 $ 10,222.98
148
149
150
151
[45] Adjusted contract sum excluding GST of $108,710.74 less 2.5% cash retention of $29,586.80 plus GST.
[46] Adjusted contract sum excluding GST of $26,450.62 less 2.5% cash retention of $14,137.81 plus GST.
What is the total judgment sum?
The total judgment sum to be entered in Contek’s favour including pre-judgment interest is $194,605.65 including GST calculated as follows:
153
154 Principal
155 Interest
156 Total
157 Lifecare project
158 $ 119,581.81
$35,705.18
159 $ 155,287.00
160 Aldi project
161 $ 29,095.68
162 $ 10,222.98
163 $ 39,318.66
164 Total Judgment Sum
165
166
$ 194,605.65
Costs
The Issues
The parties agree that costs should follow the event but disagree about what constitutes success under the rules as to general cost principles in this case.
Contek submits it should have the costs of the action on an indemnity basis from the commencement of the proceeding in circumstances where it was the successful party overall and it made various pre-action, informal and formal filed offers that were not accepted by Mossop, each offering a genuine compromise of Contek’s claims and made on terms more favourable than the final judgment sum including pre-judgment interest.
Mossop takes a very different stance. Whilst Mossop concedes it is within the Court’s discretion in all the circumstances to make no order as to costs in accordance with UCR r 194.5(11), it submits the appropriate costs order should be that there are no costs payable to Contek but Contek should pay Mossop the costs of the ‘aborted’ trial and other costs orders made in Mossop’s favour. Mossop contends Contek’s claims could and should have been brought in the Magistrates Court.
Mossop’s position on costs proceeds from the premise that Contek’s success at trial should be gauged solely by the (lesser) value of the determined disputed items for each project. Mossop seeks to diminish Contek’s success in two further ways. First, Mossop compares the total of the items determined by the Court to Contek’s pleaded claims for the unpaid contract sums for each of the Lifecare and Aldi projects. Secondly, Mossop discounts Contek’s claim by amounts it agreed were payable and amounts that were the subject of compromise during the trial. Adopting this logic, Mossop measures the result of Contek’s success for the Lifecare and Aldi projects respectively in value terms as only 39.88% and 21.7% of its claims.[47]
[47] Mossop’s Written Submissions (FDN 111).
What is the relevant judgment sum?
For the purposes of assessing costs, the final judgment sum is $194,605.65 including GST comprising the total of the unpaid adjusted contract sums and pre-judgment interest calculated as above.[48]
[48] See [87] above.
The premise of Mossop’s position on costs is flawed and its evaluation of the success of Contek’s claims artificial.
As already explained, the relief to which Contek is entitled should not be confined to two judgment sums of $53,683.67 for the Lifecare project and $6,259.00[49] for the Aldi project. There is no good reason to discount Contek’s success by reference to amounts agreed or paid into court when those amounts were not paid to Contek and withheld because Mossop maintained its assessment of Contek’s variations claims and its back charge claims was proper with the result that nothing further was owing.
[49] As stated, Mossop contends $4,611.75 should be discounted because it was paid into court.
Properly characterised the dispute between the parties before the Court concerned both the discrete disputed items and the consequential adjustments to the adjusted contract sums net of payment. Contek never abandoned its claim for unpaid agreed amounts, which Mossop acknowledges by submitting there is no contest over these amounts and the Court should not presume there is dispute about the calculation of the adjusted contract sums due under each subcontract net of payments already made. In short, the ‘agreed’ amounts were never paid to Contek.
Does UCR 194.5(11) apply?
It does not because the final judgment sum to be awarded exceeds $60,000. It would do so even if the judgment sum was to be confined (as Mossop contends it should) to the total of only the disputed items determined by the Court, which approach should be rejected. There is no principled basis for treating the disputed items for each project as separate judgment sums for the basis of assessing costs.
Is Contek otherwise entitled to a cost order in its favour?
It is well established that there may be more than one event and costs on separate issues or claims will follow the event.[50]
[50] Excelsior Land Holdings Pty Ltd v Alan Sheppard Constructions Pty Ltd [2012] SASCFC 119 at [10].
Overall, Contek was a successful applicant and costs should follow the event of its variation claims. Mossop was also a successful cross-claimant but, to a lesser extent and on claims of less value and complexity. Of the discrete claims ultimately determined by the Court, Contek succeeded on ten of the 13 claims in dispute and was successful overall in value. By comparison, where it succeeded, Mossop had a not immaterial measure of success. It successfully challenged some 30% of the value of the extra concrete claims, Contek’s cancelled concrete pour variation claim and succeeded on three of its five back charge claims for almost 50% of the claimed (albeit lesser) value.
Whilst Contek should be regarded overall as a successful applicant and entitled to a substantial award for the costs of the action, some reduction should be made on account of the measure of Mossop’s success on discrete issues.
Having regard to the proportion of time spent addressing the disputed items where Mossop succeeded, applying a broad axe, Contek’s costs of action should be reduced by 25%.
Should Contek’s costs of action be awarded on an indemnity basis?
The answer requires analysis of the settlement offers made from the commencement of the proceeding.
This history is set out in the Rusch Affidavit and only challenged by Mossop as to relevance because the offers made are said not to compare favourably to the outcome of the dispute brought to Court as Mossop characterises it.[51]
Pre-action and Early Offers
[51] Mossop’s Written Submissions (FDN 111) [57.6].
This proceeding was commenced on 6 June 2018 by Contek seeking damages for breach of contract in the amount of $197,102.58 with interest and costs for the Lifecare project only.
A pre-action settlement offer was conveyed by Contek’s solicitors to Mossop by letter dated 3 May 2018.[52] A demand was made for payment of the alleged outstanding amount of $197,102.58 for the Lifecare project only and an informal offer to resolve the any claim against Mossop for payment of the outstanding amount by Mossop paying Contek payment of $195,000, relying on the principles set out in Calderbank v Calderbank[53] on the question of costs.
[52] Rusch Affidavit Exhibit JR-1 pages 5 and 6.
[53] [1975] 3 All ER 333.
Mossop responded by its solicitor’s letter dated 15 May 2018 but received on 13 June 2018,[54] after commencement of this proceeding. It rejected the settlement offer and counter-offered in effect that the parties walk-away, each bearing their own costs. The letter engaged with Contek’s generalised claim, asked for further details, referred to the need for quantity surveyors to assess Contek’s claim for extra concrete and detailed Mossop’s back charges for Contek’s defective works.
[54] Rusch Affidavit Exhibit JR-1 pages 7 and 8.
Mossop’s rejection and counter-offer was not unreasonable in the absence of any detailed explanation of the components of the outstanding amount claimed for the Lifecare project. To comply with the then applicable rules as to pre-action offers, it was not sufficient to refer to earlier correspondence.[55] The letter should have identified the nature and basis of each separate variation claim including brief facts and formulations of both the quantum of the claim and the total costs to be incurred at a contested trial, despite the claims being the subject of contractual assessment process.
[55] Rule 33 of the District Court Civil Rules 2006 and rules 8 and 17 District Court Civil Supplementary Rules 2014.
By letter dated 4 July 2018,[56] Contek’s solicitors responded, rejecting Mossop’s offer. The letter enclosed a schedule showing how the outstanding amount was calculated and briefly responded to the substantive issues raised by Mossop’s letter.
[56] Rusch Affidavit Exhibit JR-1 pages 9 and 10.
Contek’s early settlement offers ultimately do not warrant a higher basis of costs. They were confined to the Lifecare project and claimed a principal amount that substantially exceeded the component of the judgment sum referrable to the Lifecare project ($119,581.81 including GST). They involved no genuine or material compromise.
April 2021 Informal Offers
By April 2021, the proceeding had progressed to the stage of a trial being listed in February 2021 for August 2021. Having regard to the documentary evidence tendered at trial, discovery and inspection involved substantial legal work and costs. Both parties were represented by counsel experienced in construction disputes. This was reasonable given the engineering issues the subject of dispute were relatively complex and numerous. Contek relied on its second claim[57] and second reply and defence to third defence and counter claim.[58] A claim for outstanding monies under the Aldi subcontract was included from 4 October 2019 in the Second Defence and Counterclaim.[59].
[57] Statement of Claim (Revision 2) (FDN 9).
[58] Second Reply and Defence to Third Defence and Counterclaim (FDN 24).
[59] Statement of Claim (Revision 2) (FDN 9).
By letter dated 14 April 2021,[60] Mossop’s solicitors conveyed an informal offer to settle on the basis that its client would pay Contek $30,000 plus GST.
[60] Rusch Affidavit Exhibit JR-1 page 16.
By letter dated 16 April 2021,[61] Contek’s solicitors conveyed a counter-offer by way of a further informal settlement offer, giving notice that the letter would be relied on to support an application for indemnity costs following trial if not accepted in accordance with Calderbank principles.
[61] Ibid, pages 27 to 38.
The letter comprehensively addressed the issues arising on the pleadings, quantifying the amount Contek claimed was owing on each of the Lifecare and Aldi projects, both before and after set off of Mossop’s alleged back charges, plus interest and costs. Contek offered to compromise its claims for the Lifecare and Aldi projects by accepting a payment of $180,000 including GST, comprising principal of $120,000 plus interest of $20,000 and costs of $40,000.
In assessing Contek’s informal offer for costs, it is significant that Contek’s then pleaded claim in contract for the extra steel variations (ultimately determined at a value of $29,708.43) was based on the contract drawings and untenable as then pleaded. Whilst Mossop knew the Lifecare subcontract was priced on the tender drawings, that was not the basis of Contek’s claim for a variation for extra steel in April 2021. It was not until 1 March 2022 that Contek ultimately amended its claim for extra steel to include causes of action in conventional estoppel, restitution, misrepresentation and unconscionability based on its tender drawings constituting the specification for the works.[62] Ultimately, Contek succeeded in its claim to rectify the subcontract to delete the reference to the revised drawings and, as a result, succeeded in making out its variation claim for extra steel.
[62] Claim.
When the merits of the then pleaded steel variation claims are taken into account, Contek’s informal offer does not represent a genuine compromise by comparison to the final judgment sum inclusive of interest (calculated on the same basis save as to the period for which interest should run). It was not unreasonable for Mossop not to accept this informal offer in all the circumstances.
Accordingly, Contek’s informal offer of 16 April 021 is not a basis for ordering that Mossop pay Contek’s costs of action on a higher basis that a standard costs basis.
Formal Offers
On 21 June 2021, Contek filed a formal judgment offer[63] compliant with UCR r 132.4. It offered to resolve the entire proceeding and all claims between the parties and consent to judgment being entered in Contek’s favour in the amount of $100,000 plus interest of $15,000 and included a term that Mossop pay Contek costs fixed at $30,000. The offer expired on 16 July 2021. It was not withdrawn or accepted before it expired.
[63] FDN 42.
On 7 July 2021, Mossop responded by filing a formal contract offer[64] offering to agree to pay Contek $38,000 including interest with a term that there be no order as to costs.
[64] FDN 43.
Both filed offers are formal offers but not relevant offers within the meaning of rule 132.10(1).
Specifically, Contek’s judgment offer does not comply with the requirements of r 132.10(1)(e) that it is a formal offer in compliance with r 132.4 that:
(e) contains a term that the respondent is to pay the costs of the applicant on the standard costs basis up to acceptance of the offer or 14 days after its service of the offer (whichever is earlier) or that the parties will submit to any order that the Court may make in the exercise of its discretion;
Therefore r 132.10 does not apply and r 132.11 does, with the consequence that Contek does not have an entitlement under r 132.10 to indemnity costs after rejection of a relevant offer, subject to the Court’s overriding discretion and persuasion that in all the circumstances it should be disentitled to an award of indemnity costs.
Where r 132.11 applies, the Court is to take into account that a successful applicant made a formal offer in circumstances where judgment was granted on terms no less favourable to it than the terms of the formal offer that was not accepted.
It was said in Roberts v Roberts (No 2)[65] that r 132.11 reflects the well-established costs principles referred to in Calderbank v Calderbank,[66] such that the matters ordinarily relevant to assessing the unreasonableness of an unsuccessful party’s rejection of such an offer apply. Relevant considerations are:[67]
·the reasonableness of the offer and its rejection
·the stage of the proceedings when the offer is made
·the time allowed to consider the offer
·the extent of the compromise in the offer
·the prospects of success at the time of the offer
·the clarity of the terms of the offer
·whether the offer foreshadowed that indemnity costs would be sought if the offeree rejected it
[65] [2021] SASC 91 at [19].
[66] Op cit.
[67] As articulated in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 at [23] and [25] per Warren CJ, Maxwell P and Harper AJA; Nominal Defendant v Dighton (No 2) [2012] SASCFC 97 at [8] per Sulan, Anderson and David JJ.
In submissions, Mossop did not adequately engage with the reasonableness of Contek’s judgment offer and its rejection. It does not point to any reason for not accepting Contek’s judgment offer. Rather it contends the offer is irrelevant because it does not compare favourably with the event, characterising the event as only the disputed items and complaining about the way Contek conducted its claim. Its submissions do not address the merits of Contek’s filed offer and Mossop’s persistent refusal to pay any further amounts to Contek, whether agreed or disputed, despite assessing and re-assessing the disputed claims multiple times.
Contrary to Mossop’s contentions, the judgment to be granted in Contek’s favour is plainly on terms no less favourable to it than the terms of its judgment offer. Taking into account the untenable extra steel variation claims, the amounts offered for principal and interest represent a genuine and substantial compromise of approximately $26,000 including GST by comparison to the judgment sum. The offer on costs is reasonable, accepting actual incurred costs to April 2021 were approximately $80,000 and the costs of action would be at least in that order of the amount offered for a dispute of this complexity.
The policy rationale underlying the costs rules is to encourage the resolution of litigation at the earliest practicable stage, including before the institution of proceedings. The policy imperatives are clear: to encourage the saving of private and public resources by avoiding the cost and uncertainty of litigation and to indemnify the party who made a reasonable offer of compromise against the costs thereafter incurred. The rationale for increasing the basis of the adverse costs order where there has been an unreasonable refusal of the offer is deemed appropriate because notionally the real cause and occasion of the litigation is the attitude adopted by the respondent in rejecting the compromise.[68]
[68] Grbavac v Hart [1997] 1 VR 154 at 164-5.
Bearing in mind the policy intent of the costs rules, Mossop’s refusal to accept Contek’s judgment offer was imprudent and unreasonable in all the circumstances. This refusal was unreasonable in the relevant sense because overall the judgment offer was substantially more favourable to Mossop than the outcome of the trial and its failure to accept a genuine and substantial compromise was the notional cause and occasion for the litigation continuing to trial and trial judgment.
Accordingly, Mossop should pay 75% of Contek’s costs of action from 16 July 2021 on an indemnity basis.
Payment into Court
On 27 April 2021, Mossop paid $30,767.87 into Court under UCR r 114.4 for monies it admitted it owed Contek as a result of reassessment of some variations and back charges and the release of retention as referred to in its Second Defence and Counterclaim.[69]
[69] Exhibit A200 [19] and [20].
The monies paid into court have accrued interest of $2,727.81 to 30 November 2024 and total $33,495.68. Interest will continue to accrue until the date when the monies paid in and accrued interest are paid out.
The established approach as to the discretion on costs after the payment of monies into court, subject as always to the Court’s overriding discretion as to costs, is that where the applicant recovers more than the payment in, it is entitled to its costs of action. Where the successful applicant gets no more than the payment in, the applicant is only entitled to its costs of action to the date of payment in and the respondent is entitled to its costs of action thereafter. The rationale is that costs follow the event and payment in informs the Court’s discretion on costs.
Under UCR r 114.4, payment out of court must be by order of the Court or the direction of the Registrar.
In the circumstances of this case, the amount paid into court is not sufficient to inform the Court’s discretion on costs in any relevant way. The balance held in the Suitors Fund in the parties’ names for this proceeding should be paid to Contek in partial satisfaction of the final judgment sum awarded in its favour.
Orders and Final Judgment
The final orders and judgment to be entered in Contek’s favour should be in the following form and take effect nunc pro tunc from 15 January 2024 when judgment was pronounced.
1.The following orders and judgment are to be made in substitution of the orders and judgments made on 15 January 2024 (FDN 102) and 3 April 2024 (FDN 115) and take effect nunc pro tunc from 15 January 2024.
2.The Lifecare subcontract entered into between the applicant and the respondent on 30 September 2016 is rectified by:
a.replacing the reference in the list of drawings forming the Contract drawings in Appendix D, Drawing Number 18090-S04 Issue 01 First Floor Slab Plan with Drawing Number 18090-S04 Issue 00 First Floor Slab Plan;
b.replacing the reference in the list of drawings forming the Contract drawings in Appendix D, Drawing Number 18090-S05 Issue 01 Second Floor Slab Plan with Drawing Number 18090-S05 Issue 00 Second Floor Slab Plan;
c.replacing the reference in the list of drawings forming the Contract drawings in Appendix D, Drawing Number 18090-S23 Issue 01 Structural Details with Drawing Number 18090-S23 Issue 00 Structural Details;
3.Judgment for the applicant against the respondent in the sum of $194,605.65 comprising a principal judgment sum of $148,677.49 including GST and pre-judgment interest to 15 January 2024 of $45,928.16.
4.The respondent is to pay 75% of the applicant’s costs of action on the standard costs basis until 16 July 2021 and thereafter on an indemnity costs basis.
5.The monies paid into court and all accrued interest invested in the Suitors Fund in the parties’ names for this proceeding with ledger reference C00041 is to be paid to the applicant in partial satisfaction of the final judgment sum.
6.The applicant is to file a request for payment out in the prescribed form 86 within 3 business days of the date of this judgment and orders.
ANNEXURE A – LIFECARE SUBCONTRACT
Determined or Undisputed Description Reference Ex GST Inc GST Original Lifecare Contract Sum Judgment [3] $ 1,092,180.00 $ 1,201,398.00 Concrete Variation 2 Judgment [333] $ 31,005.77 $ 34,106.35 Approved Variation 3 Mossop/Contek Summaries $ 1,050.00 $ 1,155.00 Approved Variation 4 Judgment [333] $ 1,260.00 $ 1,386.00 Approved Variation 5 Mossop/Contek Summaries $ 627.90 $ 690.69 Concrete Variation 6 Judgment [333] $ 19,627.65 $ 21,590.42 Reinforcing Variation 7 Judgment [337][454] $ 14,031.68 $ 15,434.85 Concrete Variation 8 Judgment [333] $ 13,795.11 $ 15,174.62 Reinforcing Variation 9 Judgment [337][454] $ 14,031.68 $ 15,434.85 Approved Variation 10 Mossop/Contek Summaries $ 1,827.00 $ 2,009.70 Approved Variation 11 Mossop/Contek Summaries $ 1,585.50 $ 1,744.05 Approved Variation 12 Mossop/Contek Summaries $ 1,285.20 $ 1,413.72 Approved Variation 13 Mossop/Contek Summaries $ 1,497.09 $ 1,646.80 Approved Variation 14 Mossop/Contek Summaries $ 7,287.00 $ 8,015.70 Approved Variation 15 Mossop/Contek Summaries $ 861.00 $ 947.10 Approved Variation 16 Mossop/Contek Summaries $ 525.00 $ 577.50 Approved Variation 17 Mossop/Contek Summaries $ 766.92 $ 843.61 Variation 18 Settled at trial $ – $ – Variation 19 Settled at trial $ – $ – Back Charge 1 Mossop/Contek Summaries ($ 913.08) ($ 1,004.39) Back Charge 2 Settled at trial $ – $ – Back Charge 5 Judgment [574] ($ 4,500.00) ($ 4,950.00) Back Charge 9 Settled at trial $ – $ – Back Charge 10 Judgment [492] $ – $ – Back Charge 11 Judgment [574] ($ 4,359.50) ($ 4,795.45) Back Charge 12 Settled at trial $ – $ – Back Charge 13 Judgment [574] ($ 10,000.00) ($ 11,000.00) Total Adjusted Contract Sum $ 1,183,471.92 $ 1,301,819.11 Total Amount Paid by Mossop Mossop/Contek Summaries $ 1,074,761.18 $ 1,182,237.30 Total Unpaid Contract Sum $ 108,710.74 $ 119,581.81 2.5% retention on the adjusted Contract Sum (excluding GST) $ 29,586.80
Annexure B – ALDI SUBCONTRACT
Description Reference Ex GST Inc GST Original Aldi Contract Sum Judgment [5] $ 546,500.00 $601,150.00 Variation 1 Cancel Pour Judgment [555]&[569] $ – $ – Variation 2 Cast-In Angles Judgment [535] $ 4,820.00 $ 16,302.00 Variation 3.1 Pylon Sign Pad Footing Judgment [569] $ 4,192.50 $ 4,611.75 Variation 3.2 Pre-Cast Concrete Settled at trial $ – $ – Variation 3.3 Dowels Settled at trial $ – $ – Variation 3.4 RW3 Toe Footing Settled at trial $ – $ – Back Charge 1 Absence from Site Judgment [553] $ – $ – B2 Ferrules Settled at trial $ – $ – B3 Painted External Walls Settled at trial $ – $ – Total Adjusted Contract Sum $ 565,512.50 $ 622,063.75 Total Amount Paid by Mossop Mossop/Contek Summaries ($ 539,061.88) ($ 592,968.07) Total Unpaid Aldi Contract Sum Mossop/Contek Summaries $ 26,450.62 $ 29,095.68 2.5% cash retention on the adjusted Contract Sum (excluding GST) $ 14,137.81
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