Cooke v Rixon (No. 2)
[2017] ACTSC 396
•22 December 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Cooke v Rixon (No. 2) |
Citation: | [2017] ACTSC 396 |
Hearing Date: | 1 November 2017 |
DecisionDate: | 22 December 2017 |
Before: | McWilliam AsJ |
Decision: | 1. The plaintiff is to pay the costs of the first and second defendants from 16 March 2017 to 2 August 2017, on the ordinary basis. |
Catchwords: | COSTS – discontinuance before hearing – whether proceedings had no reasonable prospect of success or were unreasonably continued – whether plaintiff unreasonably rejected Calderbank offer |
| Legislation Cited: | Limitation Act 1985 (ACT) s 36 Court Procedures Rules 2006 (ACT) rr 1002, 1010, 1160, 1163, 1721 |
Cases Cited: | Becker v Queensland Investment Corp (No 2) [2009] ACTSC 147 Calderbank v Calderbank [1976] Fam 93 Hulanicki v Walton (No 2) [2015] ACTCA 45 Leichhardt Municipal Council v Green [2004] NSWCA 341 Redmond v Masterton Canberra Pty Limited [2016] ACTSC 242 Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited[2001] NSWCA 461 |
Parties: | Hamid Cooke (Plaintiff) Paul Rixon (First Defendant) Insurance Australia Limited t/as NRMA Insurance (ACN: 000 016 722) (Second Defendant) Nominal Defendant (Third Defendant) |
Representation: | Counsel A Muller (Plaintiff) J Pappas (First and Second Defendants) |
| Solicitors Maliganis Edwards Johnson (Plaintiff) HWL Ebsworth Lawyers (First and Second Defendants) | |
File Number: | SC 35 of 2014 |
On 1 November 2017, I granted leave to the plaintiff, in accordance with r 1160(2) of the Court Procedures Rules 2006 (ACT) (Rules), to discontinue these proceedings as against the first and second defendants. Leave of the Court was required because the matter had been listed for a two-day hearing to commence on 4 December 2017.
The proceedings against the third defendant, the Nominal Defendant, have been settled separately.
Issues for determination
The question of costs in relation to the first and second defendants remains. The power to award costs is in the discretion of the Court, and in the present circumstances of discontinuance, the Court may make the order for costs it considers appropriate: see rr 1163(2) and 1721 of the Rules.
The issue was argued on 1 November 2017, with leave granted to file further written submissions subsequent to the hearing. That process was completed on 20 November 2017.
The plaintiff’s ultimate position is that there should be no order for costs.
The first and second defendants argue that they should receive the entirety of their costs, and further that such costs should be on an indemnity basis from three alternative dates.
The first date from which indemnity costs are sought is 24 February 2016, when an offer to settle the proceedings was made by the first and second defendants. It is contended this was an offer made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93 (as adopted and applied in Becker v Queensland Investment Corp (No 2) [2009] ACTSC 147 at [11]-[12]), and that it was unreasonable for the plaintiff to refuse the offer.
The second alternative date which the first and second defendants submit gives rise to indemnity costs is 1 July 2016, when the plaintiff filed an application in the proceedings to substitute the third defendant for the first and second defendants.
The third alternative date from which indemnity costs are sought is 9 August 2016, when Mossop AsJ (as his Honour then was) refused an application to amend the originating claim and statement of claim to substitute the Nominal Defendant as the defendant: see Cooke v Rixon [2016] ACTSC 236 (Cooke).
Accordingly, the issues for determination are first, the appropriate order for costs upon the discontinuance; and second, whether indemnity costs ought be ordered, from either 24 February, 1 July or 9 August 2016, or at all.
Applicable principles
Recently in Cooper v Singh [2017] ACTCA 21 (Cooper) at [14]-[16], the Court of Appeal referred to the purpose of a costs order as being to reach a fair and just result, and in doing so, cited the High Court decision of Gray v Richards (No 2) [2014] HCA 47; 315 ALR 1 at [2]:
The disposition of costs is within the general discretion of the Court. Ordinarily, that discretion will be exercised so that costs are awarded to the successful party, but other factors may have a significant claim on the discretion of the Court. The disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires.
In Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43, the Court of Appeal referred (at [41]-[42]) to the unfettered discretionary power of the Court and to Rural & General Insurance Broking Pty Ltd v Australian Prudential Regulation Authority [2009] ACTSC 67; 231 FLR 199 (Rural & General), where Penfold J surveyed the applicable authorities, including Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 186 CLR 622 (Lai Qin) at 624-625 per McHugh J, which I note is relied upon by the plaintiff here.
In Rural & General, the principles applicable to the general exercise of the discretion were set out at [82], relevantly as follows:
…
(a) The costs discretion to be exercised under r 1163(2) where a party is given leave to discontinue is at large, but must be exercised judicially.
(b) There is no presumption that under r 1163(2) costs will be awarded to one or other party. There is no entitlement to costs against the discontinuing party arising simply because in some cases it may be preferable in the interests of finality to enter judgment against the party rather than giving leave to discontinue.
(c) In the exercise of the costs discretion, it is appropriate to have regard to:
(i) whether the behaviour of each party was reasonable until the point when discontinuance was sought; and
(ii) whether seeking to discontinue reflects a surrender by the discontinuing party in a hopeless case or a supervening event or other change in external circumstances that has rendered the action “futile” or pointless.
(d) In relation to the reasonableness of a party’s behaviour, the matters that may be relevant include (but are not limited to), those set out in the following list …:
(i) whether a party has “by its lax conduct effectively invite[d] the litigation”;
(ii) whether either party has unnecessarily protracted the proceedings;
(iii) …
(iv) whether a party has prosecuted the matter solely to increase the costs recoverable;
(v) whether a party has obtained only the relief previously offered by another party in settlement offers;
(vi) whether a discontinuing plaintiff had “an arguable case” against the other party;
(vii) …
(e) In relation to the reason for seeking to discontinue:
(i) a surrender will usually leave the surrendering party to pay the other party’s costs; and
(ii) discontinuance for futility will sometimes mean that no costs order is made.
These principles were cited by Mossop AsJ (as his Honour then was) in Redmond v Masterton Canberra Pty Limited [2016] ACTSC 242 at [32]-[33] and by Refshauge J in Construction Occupations Registrar v Minotaur Constructions (ACT) Pty Ltd [2015] ACTSC 275 at [48] and in Gupta v Australia Capital Territory[2011] ACTSC 39 at [76]-[80].
With regard to offers made in accordance with Calderbank principles, the NSW Court of Appeal has referred to the objects relevant to informal offers of compromise in Miwa Pty Ltd v Siantan Properties Pte Ltd(No 2) [2011] NSWCA 344 (Miwa) at [6]-[7]. In essence, they include encouraging the saving of private costs in avoiding the inherent risks, delays and uncertainties of the litigation, saving the public costs of litigation, and (of significance to the present case) indemnifying the party who reasonably offers to compromise against costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the party who has rejected the compromise.
Basten JA, with whom McColl and Campbell JJA agreed, stated (at [8]) that the approach frequently adopted in the NSW jurisdiction has been to ask two questions, namely whether:
(a)there was a genuine offer of compromise; and
(b)it was unreasonable for the offeree not to accept it.
The Court of Appeal in Cooper stated to similar effect:
15. The application of the Calderbank principles in the Australian Capital Territory was discussed in Quirk v Bawden (1992) 112 ACTR 1. Higgins J (as he then was) noted at page 8:
In the end, the matter is one for the discretion of the trial judge. The exercise of that discretion favourably to a successful plaintiff may well, prima facie, be indicated by a substantial difference between an offer made by the plaintiff and the verdict ultimately found. However, it must also appear that the defendant had failed to act reasonably in declining to accept the plaintiff’s final offer of compromise.
16. Applying the comments of Higgins J, in order for a costs order to be made in favour of the defendant following the making of an offer substantially in excess of the final result, the plaintiff must have acted unreasonably in not accepting the offer.
However, it remains the case that an indemnity costs order does not automatically follow from the fact that a genuine offer of compromise more favourable than the final judgment was made, nor is there any presumption to that effect: see Hulanicki v Walton (No 2) [2015] ACTCA 45 (Hulanicki) at [15]; Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 790; Rolls Royce Industrial Power (Pacific) Limited v James Hardie & Co Pty Limited[2001] NSWCA 461; 53 NSWLR 626; Jones v Bradley (No 2) [2003] NSWCA 258 at [6]-[9].
It is the applicant for indemnity costs who must persuade the court that the rejection of the offer was, in the circumstances at the relevant time, unreasonable: see Hulanicki at [16] and the cases there-cited; Miwa at [16] and the cases there-cited.
As to determining whether the rejection of the offer was unreasonable considering all the circumstances of the case, in Hulanicki the Court of Appeal cited Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 at [25] with approval, in identifying the following (non-exhaustive) matters that may be taken into consideration at [14]:
(a)The stage of the proceeding at which the offer was received;
(b)The time allowed to the offeree to consider the offer;
(c)The extent of the compromise offered;
(d)The offeree's prospects of success, assessed as at the date of the offer;
(e)The clarity with which the terms of the offer were expressed; and
(f)Whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
History of the proceedings
The parties each rely heavily on the history of the proceedings as supporting their opposing positions. The solicitors with the daily carriage of the matter for the plaintiff, and for the first and second defendants, respectively, have sworn or affirmed competing affidavits emphasising and/or justifying different events. An affidavit of the plaintiff sworn 23 August 2016 was also read on this application.
The facts giving rise to the proceedings were the failure of a motor vehicle to give way to a cyclist (the plaintiff) on 2 February 2011 at a roundabout along Tharwa Drive in the suburb of Conder, knocking the plaintiff to the ground and causing serious injury to his left shoulder.
Following that collision, the plaintiff was immediately attended to by a male person that he believes was the driver of the vehicle that struck him. That person is the first defendant. The second defendant is the third party insurer.
Proceedings were commenced on 22 January 2014.
It transpired that there was some uncertainty about whether the first defendant was in fact the driver of the vehicle who collided with the plaintiff’s bicycle, or whether he was simply the equivalent of a bystander, who assisted the plaintiff at the scene of the accident shortly afterwards.
Following an application for summary judgment filed on 29 February 2016, the plaintiff sought to substitute the Nominal Defendant. As stated above, that application was unsuccessful: Cooke. However, when delivering judgment on 9 August 2016, Mossop AsJ made directions facilitating a foreshadowed application for the joinder of the Nominal Defendant and any extension of the limitation period in that regard, pursuant to s 36 of the Limitation Act 1985 (ACT).
The first and second defendant’s application for summary judgment was adjourned, amended on 5 September 2016, and ultimately dismissed by consent on 9 September 2016, with costs as between the plaintiff and the first and second defendants reserved. On that day, also by consent, the Nominal Defendant was joined to the proceedings, with the extension of the limitation period permitting such joinder to occur.
The Nominal Defendant admitted liability on 24 January 2017, but it was not until 26 September 2017 that the plaintiff settled his claim. This was after the plaintiff had filed the present application to discontinue the proceedings against the first and second defendants, on 2 August 2017.
The parties’ submissions on costs arising from the grant of leave to discontinue
Dealing first with the issue of what flows from the discontinuance, the plaintiff essentially relies on the principles set out in Lai Qin. The plaintiff submits that the proceedings were reasonably commenced and conducted, and that he has achieved relief through the alternative path of the Nominal Defendant admitting liability and resolving the claim, in terms not disclosed in the evidence before the Court. It was only when the claim against the Nominal Defendant was resolved that the claim against the first and second defendants became pointless.
The first and second defendants, on the other hand, submit:
(a)The claim was futile from the outset because the plaintiff was never able to identify the vehicle which collided with his bicycle;
(b)The plaintiff acted unreasonably in failing to properly analyse the available evidence and in failing to conclude that it had been caused by an unidentified motor vehicle;
(c)The plaintiff ignored the exhortations of the second defendant from as early as 20 January 2014 to sue the Nominal Defendant (with the email being in evidence on this application);
(d)The plaintiff did not attempt to speak to the first defendant and obtain from him a version of events;
(e)The plaintiff ignored the ‘advice’ from the first and second defendants’ solicitors that the first defendant had nothing to do with the accident, such advice apparently based on an accident investigation report;
(f)The plaintiff unreasonably continued with the claim after a compulsory conference on 22 July 2015;
(g)The plaintiff unreasonably ignored the fact that the first and second defendants had filed a defence denying liability, including a denial of the allegation that the plaintiff had been struck by the insured vehicle;
(h)The plaintiff unreasonably ignored correspondence from the first and second defendants’ solicitors where the ‘fundamental flaw’ in the plaintiff’s case is asserted to have been clearly made, namely that the plaintiff could not establish that the person who stopped to enquire after his welfare was the driver of the vehicle which had struck him and his bicycle.
The first and second defendants’ submissions as to the offers of compromise made will be discussed separately below.
Consideration
Having regard to the considerations set out in Rural & General above, I accept that the proceedings were reasonably commenced and reasonably conducted up to February 2017. The plaintiff’s statement to police demonstrates there was an arguable case against the first and second defendants.
It is important to remember that the denial of liability and the evidence of the first and second defendants has never been tested. It is inappropriate to embark upon a hypothetical trial now as to whose version of events might have been accepted, but for the Nominal Defendant’s late joinder and admission of liability.
The first and second defendants did not serve any signed statement by the first defendant until November 2016. In circumstances where the first defendant was represented, I do not consider that it was unreasonable for the plaintiff to proceed upon his own version of events (including his inferences from his observations) and not to obtain a statement from the first defendant earlier or to ‘analyse the available evidence’, which includes the police Traffic Accident Information report received by the plaintiff October 2013, and in particular the record of interview by the police of the first defendant on 5 July 2012, although I note the submissions of the first and second defendants do rely on other correspondence from the second defendant setting out its position.
The main reason for this view is that, even if such a statement had been obtained from the first defendant or a different analysis been undertaken ‘by an experienced practitioner’, all that would have been established is a dispute on the facts. It is a well-known risk of litigation that what may appear to be a strong case will often not survive the blowtorch of cross-examination and other testing as occurs in a forensic situation: Egan v Mangarelli (No 2) [2012] NSWSC 1226 at [43].
The Court must also be extremely careful to refrain from using an admission made by a third party at a later date as affecting the assessment of the reasonableness of a plaintiff’s conduct in relation to other defendants years earlier.
In addition, there was the uncertainty arising from the limitation period expiring against the Nominal Defendant. If that question had not been resolved in the plaintiff’s favour, it may well have been that the plaintiff’s only option was to attempt to prove liability against the first and second defendants. Bearing in mind the civil standard is only to the balance of probabilities, I am not prepared to find that this was a case where the first and second defendants were at all times almost certain to have succeeded.
In my view, the presence and attitude of the Nominal Defendant amounts to changed circumstances since the proceedings were commenced. Had the plaintiff filed a notice of discontinuance shortly after the admission of liability by the Nominal Defendant on 24 January 2017, I would have been minded to order that each party pay their own costs.
From this point on, the procedural landscape had changed in relation to the first and second defendants, and the evidence establishes that the parties recognised this.
On 16 February 2017, and in response to an offer made by the first and second defendants (discussed below) the plaintiff sent a letter to the solicitors for the first and second defendants in the following terms:
The [p]laintiff is prepared to resolve this claim as against the 1st and 2nd [d]efendants on the following basis:
1.[Judgment] be entered in favour of the 1st and 2nd [d]efendants as against the [p]laintiff;
2.The [p]laintiff pay the 1st and 2nd [defendants’] costs of their application in proceeding dated 24 February 2016 and their costs in relation to the [p]laintiff’s applications in proceedings dated 1 July 2016 and 23 August 2016;
3.The costs referred to in order 2 not be assessed or recovered until the completion of the action; and
4.Apart from the costs referred to in order 2, each party bear his or its costs of the proceedings.
The offer was expressed to have been made in accordance with Part 2.10 of the Rules and was open for acceptance for one month. Alternatively, the offer was expressed to be made as a Calderbank offer.
The plaintiff relied on the principles applicable to offers under Part 2.10 of the Rules only to the extent of submitting that it was a matter to be taken into account in the exercise of the Court’s discretion, supporting the submission that the appropriate order is one where each of the disputing parties meets its own costs.
The order for discontinuance is no less favourable than the offer to enter judgment for the first and second defendants. But for the plaintiff’s condition that the costs not be payable until the completion of the action, such an offer would have met the requirements of r 1002(3) of the Rules. The first and second defendants may well have been facing paying the plaintiff’s costs of the proceedings, pursuant to r 1010(2)(a) of the Rules.
The offers exchanged between the disputing parties are considered separately below. For present purposes, the focus is on the reasonableness of the plaintiff’s conduct in continuing the proceedings.
Although the above offer was reasonable in the circumstances, the corollary of it being made, and indeed, of all the offers made after that date by the plaintiff, is that it shows the plaintiff was clearly not intending to pursue his claim against the first and second defendants once it had the admission of liability by the Nominal Defendant. This was not a case where any question of joint liability between defendants potentially arose. This was a case of alternate liability.
I reject the plaintiff’s submission that it was only at the point of the achievement of a settlement with the nominal defendant that the claim against the first and second defendants became pointless. The application to discontinue was filed a month before any settlement with the nominal defendant was reached.
The reason the proceedings continued from February 2017 to August 2017, as between the plaintiff and the first and second defendants, was partly because of inertia on the part of the plaintiff’s legal representatives, and partly because the parties could not agree as to the appropriate orders for costs. This is shown through the correspondence of the first and second defendants (through their solicitors) on 30 June 2017, setting out their understanding that the proceedings were to be discontinued against them, but noting that the plaintiff had yet to carry out that course and that accordingly, they were still incurring costs in preparing to defend the proceedings.
On 12 July 2017, the plaintiff confirmed that was the intention, but yet attended the Court on 13 July 2017, where the matter was listed for hearing against all defendants. It was not until 2 August 2017, and apparently pursuant to a direction of the Court, that the application to discontinue against the first and second defendants was actually filed.
I accept that the costs of litigation are often a significant consideration in attempts to resolve proceedings. However, there are cases where the inability to agree on costs should not prevent the discontinuance or the taking of other steps to bring the substantive issue between the parties to a close. If a party delays discontinuing proceedings in the hope that he may be able to secure a better costs compromise or outcome at a later stage, then that is at the party’s risk and the delay may itself have costs consequences. Section 5A of the Court Procedures Act 2004 (ACT) obliges the parties to assist the Court in the timely disposal of the real issues in dispute. If the costs of the litigation remains the only real issue in dispute, it is incumbent on both parties to have that matter resolved, either by consent or, in the present case, by seeking leave to discontinue the proceedings and bringing the question before the Court in a timely fashion.
The above leads me to conclude that from 16 March 2017 when the plaintiff’s offer expired and where the plaintiff knew he was not proceeding against the first and second defendants, it was not reasonable to continue the proceedings. The fair and just result is that the plaintiff should pay the first and second defendant’s costs from that date until the date the application to discontinue was actually filed, being 2 August 2017.
The first and second defendants’ claim for indemnity costs
The offer on 24 February 2016 was for $120,000 plus costs. There was no breakdown of how such an amount was calculated. While that might not be a pre-requisite for every Calderbank offer, in the circumstances of this case, the lack of any particular detail does have some bearing on whether the plaintiff was really in a position to evaluate the extent of the compromise offered, including whether the offer was a genuine attempt to compromise the claim, or merely a letter designed to trigger costs sanctions: see Leichhardt Municipal Council v Green [2004] NSWCA 341 at [22]-[27].
Those circumstances include first, that the offer was made at a relatively early stage in proceedings, bearing in mind that a defence was only filed in September 2015 (it appears due to difficulties in service of the originating application and statement of claim). Importantly, no evidence had been filed in the proceedings. The plaintiff was really not in a position to assess the merit of the defence. The letter of 24 February 2016 simply states that the first and second defendants had a view the claim disclosed no reasonable cause of action and referred to a foreshadowed application for summary judgment. I have already found above that it was reasonable for the plaintiff to continue the proceedings based on his own observations and inferences, notwithstanding the instruction and assertions of the first and second defendants to the contrary.
Second, and perhaps more importantly, the amount was offered in circumstances where the statement of claim indicated that the plaintiff himself was not yet able to quantify the damages he claimed in certain respects, but he indicated that he intended to claim for future economic loss and to make an ongoing claim for domestic assistance. The past out of pocket expenses alone claimed at $25,966.05 and the plaintiff was not yet able to quantify the future out of pocket expenses.
The offer was open for acceptance until 16 March 2016. Although the plaintiff had sufficient time to consider the offer, as he responded on 7 March 2016 with a counter-offer seeking $250,000 plus costs. In my view there was insufficient material at that stage of the proceedings to allow the plaintiff to properly evaluate the offer or the ‘extent of the compromise’, in terms of the amount and/or underlying merit.
The plaintiff submitted that in the context of the final settlement figure actually reached with the Nominal Defendant, it was not unreasonable to reject the offer of 24 February 2016. However, the actual terms of the settlement were not properly in evidence before the Court. Rather, the settlement amount was disclosed in the plaintiff’s submissions filed after hearing. Further and in any event, a later settlement with a different party was not information known to the plaintiff at the time the offer was made. Accordingly, I have disregarded that submission.
Nevertheless, and emphasising that early offers are to be encouraged, in the circumstances above, it was not unreasonable for the plaintiff not to accept the offer at the time it was made.
Turning then to the first and second defendants’ submissions that costs should be on an indemnity basis from 1 July or 9 August 2016, neither of those dates rely on the terms of any offer. Instead, they are put on the reasonableness of the plaintiff’s conduct in continuing the proceedings, and the arguments are disposed of by my findings on the reasonableness of the plaintiff’s conduct in relation to the discontinuance above.
For completeness, the arguments relying on comments in the judgment of Mossop AsJ in Cooke at [8], [28] and [34] are subsumed by my findings above that it was not unreasonable to continue the proceedings after judgment was delivered on 9 August 2016 because of the uncertainty surrounding the limitation period in respect of the Nominal Defendant.
I would only add to the reasons above that Cooke was directed towards determining a different issue, with somewhat different evidence, and at an interlocutory stage. It cannot be said that his Honour’s observations amounted to any particular finding of fact (as to what the plaintiff could or could not prove) that would result in a finding binding upon me here that the plaintiff’s claim against the first and second defendants was either vexatious in disclosing no reasonable cause of action, or was in some other way unreasonable.
Finally, the first and second defendants submitted that there were a series of ‘steps’ set out by Mossop AsJ at [34] under the Rules, which the plaintiff did not follow. These steps were the joinder of the Nominal Defendant, leave granted to amend the pleadings, and the current defendants removed as parties to the proceedings. However, the fact that the plaintiff’s actual course did not precisely mirror those steps does not mean that the course the plaintiff did take was unreasonable, such as to warrant indemnity costs. That is a special order and one not lightly made.
Had the Nominal Defendant not admitted liability, it may well have been the case that the plaintiff would have been required to run alternate claims against all three defendants, and I do not consider it was unreasonable to refrain from removing the first and second defendants as parties until the attitude of the Nominal Defendant was formally on record. I have found that there was a point after that admission of liability where the plaintiff had communicated its position, could no longer justify keeping the first and second defendants in the proceedings, and therefore should be required to pay the first and second defendants’ costs. However, I do not consider the plaintiff’s conduct since Cooke was delivered provides any basis for indemnity costs.
Conclusion and Orders
Neither party has substantially succeeded on the orders they respectively sought in the present application. Up until the hearing, the plaintiff was seeking its costs. Each party should pay its own costs from the date the application to discontinue was filed.
The Court orders:
1. The plaintiff is to pay the costs of the first and second defendants from 16 March 2017 to 2 August 2017, on the ordinary basis.
| I certify that the preceding sixty-three [63] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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