PORTO & PORTO
[2011] FamCA 247
•31 March 2011
FAMILY COURT OF AUSTRALIA
| PORTO & PORTO | [2011] FamCA 247 |
| FAMILY LAW - COSTS - Between parties |
| Family Law Act 1975 (Cth) |
| Colgate-Palmolive company & Anor v Cussons Pty Ltd [1993]FCA 536 Yunghanns & Yunghanns (2000) FLC 93-029 Jones & Jones (1990) FLC 92-143 Dorfer & Dorfer [2009] FamCA 893 Stephens & Stephens & Another (2009) FLC 93-425 Grincelis v House (2000) 201CLR 321 Kowaliw & Kowaliw (1981) FLC 91-092) |
| APPLICANT: | Ms Porto |
| RESPONDENT: | Mr Porto |
| FILE NUMBER: | MLC | 3219 | of | 2007 |
| DATE DELIVERED: | 31 March 2011 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Dessau J |
| HEARING DATE: | 21 January 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Costell |
| SOLICITOR FOR THE APPLICANT: | Holding Redlich Lawyers, Melbourne |
| COUNSEL FOR THE RESPONDENT: | Mr Glover |
| SOLICITOR FOR THE RESPONDENT: | Berry Family Law, Flagstaff |
Orders
That the wife shall pay the husband’s costs of 17 December 2010, such costs to be agreed within 21 days of the date of these orders, and failing agreement, to be taxed.
That the husband shall pay the wife’s costs, on an indemnity basis, of 3½ days’ of the 5-day hearing ending 11 November 2010, and of the proceedings (in addition to the costs already to be taxed pursuant to the orders of 14 December 2007, 20 March 2008 and 17 December 2009, and the costs fixed at $4,178 but outstanding pursuant to the order of 25 March 2009), such costs to be agreed within 21 days of the date of these orders, and failing agreement, to be taxed.
That the sum to be paid by the wife to the husband in paragraph 1 of these orders shall be off-set against the sum to be paid by the husband to the wife in paragraph 2 of these orders.
That the husband shall pay to the wife interest from 22 January 2011 at the rate prescribed by the applicable Rules of Court or so much of the money ordered to be paid by paragraph 3 of the orders of 17 December 2010 as is from time to time unpaid.
IT IS NOTED that publication of this judgment under the pseudonym Porto & Porto is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 3219 of 2007
| Ms Porto |
Applicant
And
| Mr Porto |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
I gave judgment in this matter on 8 December 2010 and pronounced final property orders on 17 December 2010. The issues of costs and interest were adjourned to 21 January 2011.
The wife seeks:
·Costs on an indemnity basis
·Interest on the judgment debt
·Interest back-dated to the start of the proceedings
·A mechanical order to ensure that various unpaid costs orders in her favour be paid to her from the husband’s share of the property settlement
The husband seeks:
·His costs thrown away on 17 December 2010
The husband’s costs
The husband’s application is hard for the wife to resist. The costs argument was due to take place on 17 December 2010. The wife was seeking indemnity costs but failed to provide the costs agreements in accordance with rule 19.08(3) of the Family Law Rules 2004. That was the essential cause of the adjournment. It was not due to any fault on the husband’s part. Ultimately that was conceded by counsel for the wife, Ms Costello. I am satisfied that the husband’s costs of 17 December 2010 were wasted, and should be paid by the wife.
Mr Glover for the husband had initially sought costs for 21 January 2011 as well. Ms Costello rightly submitted that day was not wasted. The costs and interests arguments were heard. Mr Glover could not argue against that.
The husband then sought not only his counsel’s and solicitor’s fees for 17 December 2010, but also the costs of the written submissions required for the follow-up hearing. His argument was that but for the adjournment, the parties would not have been required to prepare those written submissions. I am satisfied however that they were required due to the complexity of the issues. They were designed to ensure fairness to both parties, the more so for the husband, for his legal representatives to know the arguments they would need to meet. Moreover, the wife will succeed on many of the submissions. I do not propose any costs order in the husband’s favour in relation to the written submissions.
Mr Glover provided his estimates of the husband’s costs. Ms Costello submitted that if the wife obtains a costs order and her costs are to be determined by agreement or failing agreement by the Registrar, then the husband’s costs should be determined in the same way. There was no objection to that approach. She also proposed that the ultimate sum of costs to be paid by the wife to the husband should be off-set against outstanding costs in the wife’s favour. I agree.
The wife’s costs
The wife has a very strong claim for costs in this case, and for costs on an indemnity basis.
Section 117 of the Family Law Act deals with the question of costs. A court may make such order as to costs as it considers just. It is a discretionary matter. Section 117(2A) sets out matters that the court should consider in exercising the discretion. Before turning to that, I note the special provisions in s 117AB of the Act.
Section 117AB, introduced in 2006, applies to a case in which the court is satisfied that a party has knowingly made a false allegation or statement in the proceedings. Sub-section (2) provides that the court “must” order that party to pay some or all of the costs of another party to the proceedings.
My findings in this case are clear. The husband’s statements, that the family monies were lost overseas, were knowingly false. Accordingly, I must order that he pay some or all of the wife’s costs.
Mr Glover conceded that the husband should pay some of the wife’s costs, but not all of them. He pointed to the fact that the wife had been unsuccessful in some parts of the substantive case. It is true. Until the first day of trial, she had claimed that there was some $9.750 million in the pool, but ultimately the pool was found to be only $4.806 million. Although counsel for the wife complained about the husband’s failure to make proper discovery, it was apparent on the first day of trial that he had made available all relevant documents at least as to the amount of monies available for the parties to send off-shore, but the wife or her lawyers had not availed themselves of that discovery. Moreover, the first day of trial was effectively lost because the wife and her counsel were looking at those previously available documents, only then to concede that the pool was very significantly less than they had claimed.
Mr Glover also submitted that although the case was run on the basis of the whereabouts of the money, no specific findings were made as to where they are now held. In addition, substantial legal costs up to trial would have been incurred in any event in “a normal property case”.
In exercising my discretion as to the costs the husband must pay, I turn to the considerations set out in s 117(2A) of the Act.
Section 117(2A)(a) refers to the financial circumstances of each of the parties. In the event that the wife receives her entitlement under the orders, each party will have several million dollars at their disposal. Without that, the wife is in a very difficult financial position, without any significant capital base, and only part-time work as a cleaner. In addition to the property settlement from monies, the husband owns a property in European Country 1 which, according to his financial statement, is worth about $200,000. He will be in a slightly better financial position than the wife, even if they each have their share of the matrimonial property as determined under the orders.
Section 117(2A)(b) refers to legal aid. I was not told that either party was in receipt of legal aid.
Section 117(2A)(c) deals with the conduct of the parties throughout the proceedings. My Reasons for Judgment refer to the husband’s unimpressive conduct in largely refusing to co-operate with the wife’s endeavours to trace the overseas monies, and include the fact that on one occasion I sentenced him to imprisonment for his refusal to sign a pertinent authority. My findings are clear: that he has deliberately secreted the monies, his conduct has been very poor, and his evidence dishonest.
Section 117(2A)(d) relates to whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court. It follows from what I have just noted that, had the husband made a full and frank disclosure about the location of the family wealth, and complied with orders directed towards finding it, these proceedings may have been avoided.
Finally, s 117(2A)(e) brings into consideration whether any party to the proceedings has been wholly unsuccessful. The major thrust of the case, during the proceedings and trial, was whether a very substantial sum of money, representing almost the totality of the parties’ working lives in Australia, was genuinely lost overseas, or deliberately concealed overseas by the husband. The husband’s claim that he had genuinely and innocently lost the monies was wholly unsuccessful.
The wife was, however, unsuccessful in her claim as to the amount sent overseas. First, as to the sum available from the sale of the properties in Australia, as claimed by her until late on the first day of trial. Secondly, as to several specific sums she said the husband had taken overseas, a claim she ultimately had to concede was not supported on the evidence. Although they should be taken into account, those matters were never the main part of the case or the time taken to prepare or complete it.
The wife should receive costs from the husband. Mr Glover is correct however when he argues that not all her costs should be met by the husband.
I turn first to the costs of the trial. By the end of the first day of trial, the sum realised by the sale of the parties’ various properties in Australia and thus available to be sent overseas was agreed, but until then the wife’s assertions had been grossly inflated. That could have been defended on the basis it was the husband who ran their financial affairs. However, the relevant documents had been properly discovered and available to her and her solicitors for some time. Even though she had changed solicitors’ firms, the same solicitor represented her in each firm. Her excuse that in the change of firms, the first firm had retained a lien over the documents, was inadequate in those circumstances.
I take into account that the issue of the sum available to be sent overseas was never the substantial part of the contest. It was not the focus of the prolonged tracing exercise over the years of the litigation, nor of the trial beyond that first day. But the first day of trial was effectively lost due to the inspection of the discovered documents which, once it took place, readily led to an agreement as to the monies reaped from the sale of the Australian properties. The husband should not have to pay the wife’s costs for that lost day.
Otherwise, I take into account that at trial the wife argued there were some monies removed overseas, over and above those agreed by the husband. As noted, ultimately the evidence did not sustain that. The evidence was woven throughout the other evidence which was primarily directed to the lost or concealed monies, but it did occupy some of the trial time. Doing the best that I can, I propose that the costs to be paid by the husband in relation to the five-day trial should be reduced by another half-day, so that he should meet the wife’s costs for 3½ days’ of trial.
I turn then to the costs leading up to the trial. The proceedings were on foot from March 2007 until the start of the trial in November 2010, a period of just over 3½ years. Most of that time was consumed by efforts on the wife’s behalf to trace the monies from the European country 1 bank accounts in which they had started, through European Country 2 bank accounts, and beyond. It was a difficult and laborious process, particularly in light of the husband’s lack of co-operation.
I reject Mr Glover’s submission that I should allow for the fact that substantial legal costs up to trial would have been incurred in any event, in what he referred to as a “normal property case”. Had the husband been honest about the whereabouts of the monies, these parties would have had liquid funds at the end of a long marriage with, uncontentiously, an equal contribution, and no dispute about any s 75(2) or other adjustments. I cannot assume that there would have been a necessity for property proceedings. I am satisfied that the wife is entitled to her costs of the proceedings before the trial (subject of course to the various costs orders already made, referred to below).
I have the discretion to award costs on an indemnity basis. In the Federal Court, in Colgate-Palmolive Company & Anor v Cussons Pty Ltd [1993] FCA 536, it was held that the circumstances for indemnity costs included the wilful disregard of known facts, the making of allegations which ought never have been made, or the undue prolongation of a case by groundless contentions.
In Yunghanns and Yunhganns (2000) FLC 93-029 the Full Court emphasised that it is not a condition precedent to the exercise of the discretion for indemnity costs that “some collateral purpose or species of fraud be established against the party against whom such an order is sought.” Rather, it is whether the facts and circumstances of the case “warrant the making of an order for the payment of costs other than on a party-party basis” (see Shepherd J in Colgate-Palmolive Company & Anor v Cussons Pty Ltd (at 233)).
The facts and circumstances of this case warrant an order for indemnity costs. I have found the husband dishonest in his claim that the family monies taken overseas are no longer available for a fair distribution between the parties. He has shown a wilful disregard of the known facts, and he has persisted in what would have been seen on proper consideration to be a hopeless case.
That brings me to how the wife’s costs are to be assessed. At the first part of the costs hearing on 17 December 2010, Ms Costello asked me to fix the wife’s costs at $261,890.54. On 11 January 2011, the wife filed an Application in a Case in which she sought that her costs be fixed at $211,021.85.
On 17 December 2010, I made it clear to Ms Costello that I was concerned about fixing a very substantial sum of costs without the benefit of the more thorough assessment by way of taxation. The substantial change in the sum sought by the wife, between hearing dates, fortified me in that view. Ultimately, Ms Costello conceded that the practical reality demands taxation of the wife’s costs, unless they are agreed by the parties. I shall frame the costs order accordingly.
I note outstanding costs orders already made in the wife’s favour.
Paragraph 3 of the orders of 20 March 2008 provided for the husband to pay the wife’s costs of and incidental to hearings on 14 December 2007, 12 March 2008, 18 March 2008 and 20 March 2008, on an indemnity basis, in a sum to be agreed in 14 days and failing agreement to be taxed.
Paragraph 5 of the orders of 25 March 2009 provided for the husband to pay the wife’s costs of and incidental to that hearing, fixed at $4,178.
On 17 December 2009, the husband was ordered to pay the wife’s costs of the interim proceedings on an indemnity basis, the sum to be agreed by 29 January 2010 and failing agreement to be taxed.
As I understand it, the fixed costs have not been paid, no other costs have been agreed, no costs taxed, and no costs paid.
Interest on the sum to be paid to the wife under the property orders
The wife seeks interest on the judgment sum of $2,096,807 as follows:
·At the rate of 10.5% per annum for the period 17 December to 31 December 2010
·At the rate of 10.75% per annum for the period 1 January to 30 June 2011.
Section 117B(1) of the Family Law Act provides that where a court makes an order for the payment of money, interest is payable, at the rate prescribed by the Rules, from the date on which the order is made or the date on which the order takes effect, whichever is later. It is subject to sub-section (2) that provides for a discretion. The court can decide that no interest be paid, or that it be paid at a different rate than provided in the rules, or from a different date than specified in sub-section (1).
I am satisfied that the wife is entitled to interest on the monies owing to her under the judgment. Ms Costello submitted that interest should run from 17 December 2010. That was the date the orders were made, but the payment was not due until 21 January 2011. Under s 117B(1) of the Act, interest should be payable from that later date. There is no reason to change that.
Rule 17.03 of the Family Court Rules 2004 provides for the prescribed rate of interest, currently set at 10.75% per annum. It is a penalty rate, reflecting that a successful party should not be deprived the benefits of a court order in his or her favour, but also that a non-compliant party should be penalised so that there is no financial gain from failing to meet his or her obligations under an order.
I am satisfied that the wife should receive interest on the judgment sum at the rate prescribed under the rules. The husband will suffer the expense for any period during which he fails to pay. That is in his hands.
Interest from the start of proceedings
The wife also seeks interest on the judgment sum from 22 March 2007, when proceedings were issued, until judgment, at the rate of 7.57%, being the average variable interest rate charged to customers by banks for variable housing loans as compiled by the Reserve Bank of Australia. She calculates the sum at $594,495.
Ms Costello submits that as the husband would have or could have earned interest on the assets of the marriage controlled by him since separation, it would be unjust to reward his misconduct by allowing him to retain a windfall gain. She submits that an award of interest to the wife would provide some compensation to her for being kept out of the money for so long, and would also discourage other parties from hiding assets and delaying litigation in order to have the sole benefit of interest on hidden monies.
Mr Glover concedes that s 117B(2) of the Act provides the court with the discretion to order interest for a period before judgment, but he submits that in this case the issue should have been dealt with in determining the asset pool so that it could have been taken into account in the substantive s79 proceedings.
I note that neither counsel could refer me to, nor have I been able to find, any authorities precisely on point. I have not been directed to any case in this Court with an authoritative pronouncement in relation to pre-judgment interest, nor a decision where it has been ordered.
Ms Costello referred me to Jones and Jones (1990) FLC 92-143, where the Full Court considered a trial Judge’s decision for a property to be sold by the parties and the proceeds to be distributed between them, but for the husband to pay the wife interest on her share if the property was sold after a specified date. The Full Court held that when s 117B of the Act refers to “an order for payment of money”, it prima facie means an order for the payment of money from one party to the other. Interest should not have been ordered when the bulk of monies payable to the wife were to be raised by herself from her share in the home. The Full Court then noted (by way of obiter) that it may be appropriate to order the payment of interest where one party has the sole use of a property until a sale takes place, or one party unreasonably delays or frustrates an ordered sale.
Ms Costello also relied on Dorfer & Dorfer [2009] FamCA 893, where Stephenson J found that a wife did “unreasonably delay or frustrate the ordered sale” of a property and, citing Jones, Stephenson J exercised her discretion under s 117B(2) of the Act to order interest in favour of the husband relevant to that period of delay.
Like Jones, Dorfer dealt with interest in a period after the property orders. So did the Full Court’s decision in Cross and Beaumont [2007] FamCA 123, and the authorities referred to in the course of that decision.
That brings me to the Full Court’s decision in Stephensv Stephens and Another (2009) FLC 93-425, in which May, Boland and O’Ryan JJ considered a husband’s appeal against orders enforcing previous property orders, and the wife’s cross-appeal in relation to the rate of interest applied by the trial Judge in awarding interest to her on the judgment debt. It was at a lower rate than prescribed in rule 17.03 of the Family Law Rules.
The wife’s cross-appeal was allowed. The Full Court held that the trial Judge was obliged to be satisfied that it was in the interests of justice for the rate to be varied, and he had failed to address that fundamental issue. Further, although the purpose of an award of interest on a judgment debt included that it was compensatory, in confining the enquiry in that way, the trial Judge was in error.
Although the decision in Stephens related to interest on a judgment debt, the Full Court made some broader observations under the heading “Interest up to Judgment”.
The Full Court considered the statutory provisions in other jurisdictions, usually giving the court a specific discretion to include in the sum for which judgment is given a sum for interest. It considered the provisions in proceedings for the recovery of money, including debt or damages, in various jurisdictions. It referred to the function of an award of such interest as designed to do more complete justice between parties by compensating a plaintiff who has had to wait for money “lawfully due”.
The Full Court referred to the High Court’s decision in Grincelis v House (2000) 201 CLR 321 which had noted that statutory provisions for interest from the time of the cause of action or commencement of proceedings until judgment could also serve to encourage early resolution of litigation. The High Court had added that there may be a distinction between cases for debts and sums certain rather than, for example, personal injury claims. The extension of that distinction to a family law property settlement which, like a personal injury claim, is not for a debt or sum certain, was not explored by the Full Court. Instead, it briefly considered the method of fixing interest, before concluding, at paragraph 409:
It is not necessary for us to discuss any further the discretion to award interest up to judgment and what we have said is only to contrast the position in relation to interest on a judgment debt.
The Stephens judgment continued under the heading “Exercise of Power Pursuant to Section 117B(2) of the Act.”
At paragraph 410 of the judgment, the Full Court observed that:
…In proceedings under s 79 of the Act no separate assessment of compensation by way of interest is ordinarily included in a judgment because the determination of what is a just and equitable outcome is at the date of the trial and not some earlier date.
In the next paragraph, the Full Court cited Jones, as to the cases where one party has the sole use of a property until a sale takes place, or one party unreasonably delays or frustrates an ordered sale. The Full Court considered that in proceedings under s 79, an order for interest could be made pursuant to the powers in s 80 of the Act.
Section 117B of the Act does not limit the exercise of the court’s discretion to interest on a judgment debt. It is sufficiently wide for the court to order interest up to judgment. The Full Court in Stephens, in its consideration of interest up to judgment, by way of obiter, did not suggest other than that wide discretion. In this case however, Mr Glover submits that any award of interest should have been made as part of the s 79 considerations, rather than under s 117B as now sought by the wife.
Although in Stephens the Full Court observed that ordinarily there is no separate assessment of compensation by way of interest in s 79 proceedings, it did not suggest that the course was not open. As noted, the Full Court suggested such orders could be made, in certain circumstances, pursuant to the powers in s 80 of the Act. However, as the issue was not germane to the Full Court decision, the circumstances were not expanded upon or considered in detail.
In my view, the reason that ordinarily no separate assessment of compensation by way of interest is made in s 79 proceedings is because, ordinarily, there is no specific sum owing from one party to another until an order is made for a sum to be paid or an asset transferred, as determined by the court as the just and equitable outcome as at the date of trial. Historical events however naturally and appropriately feed into that determination. That is clear in many instances, including when a court considers contributions in terms of the assets that the parties have brought into the relationship, or how each party has treated certain assets (for example if one has used joint monies that then need to be added back into the pool), or a party’s conduct that has financial or economic significance as a factor under s 75(2)(o) of the Act (see cases such as Kowaliw & Kowaliw (1981) FLC 91-092).
The Full Court’s observations in Stephens did not seek to reflect upon or to curb or prescribe the ways in which the court can take into account the fact that one party has used assets to the exclusion of the other party, for example when, as here, he has hidden the assets. It may well be a relevant consideration under s 75(2)(o) of the Act, in determining the just and equitable property settlement.
In this case, no such consideration was raised in the course of the s 79 proceedings. The wife was represented throughout. It was conceded on her behalf that the assets, whatever and wherever they were found to be, should be divided equally between the parties.
The question remains as to whether, particularly in light of the absence of any request for this factor to be taken into account in the course of the s 79 proceedings, I should now exercise my discretion for an order in the wife’s favour for a very substantial sum of interest from the time of the cause of action to the time of the judgment.
Section 117B provides a wide discretion. Neither the Second Reading Speech nor the Explanatory Memorandum from the section’s introduction in 1983 cast particular light on the power, save that Clause 70 of the Explanatory Memorandum refers only to the new section providing “for interest to accrue, at a prescribed or other rate, on lump sums of money ordered (emphasis added) to be paid under the Act unless the Court otherwise orders …”
I cannot speculate why it is difficult to find decisions where pre-judgment interest has specifically been ordered in this Court. It may simply be that for the reasons I have outlined above, the exercise of the s 79 discretion is sufficiently broad to take into account how and by whom the assets of the marriage have been used prior to trial. That is, a determination of the use of the assets is framed within the s 79 considerations and the justice and equity outcome, rather than in terms of pre-judgment interest traditionally used in other forms of civil and commercial proceedings.
I do not propose exercising my discretion in favour of the wife in relation to interest before the judgment debt was due. She seeks nearly $600,000, a very high proportion of the asset pool. Had she sought an adjustment in the course of the s 79 proceedings, to take into account these same factors, I expect there could have and would have been evidence to include, amongst other things, the various rates of interest, potentially in Australia, European Country 1 and European Country 2, at various times, and as to how quickly or slowly the wife at times prosecuted her application. I am not satisfied that it is fair to order the very substantial sum now sought in this case at this stage of the proceedings.
THE ORDERS
I shall make orders to ensure that the small sum of costs the husband is due to receive from the wife (as agreed or determined by a Registrar of the Court), shall be off-set against the more substantial costs that are already owing to the wife pursuant to previous orders and shall now increase as a result of these orders.
I shall allow 21 days for the costs to be agreed, failing which a Registrar shall determine the costs. I note that the various outstanding costs, none of which have been agreed, also require assessment, save for one costs sum that was fixed.
Ms Costello raised the question of the mechanics for the wife to obtain her costs, although she did not make detailed submissions about it. I have reflected upon the very significant costs that shall, as a result of these and the previous orders, be owed to the wife. The current orders ensure that the husband cannot leave Australia before 6 December 2011 without first obtaining a court order. He can apply to the court to lift that restraint before then, and if the judgment debt and outstanding interest and costs are paid, there could be no basis to further restrain his movements. In the event those sums have not been paid by 6 December 2011, the wife has the capacity to seek an extension of the time the husband is restrained from leaving the country until she has received the sums owing under the orders for property, costs and interest.
The orders I propose, subject to any submissions as to form, are as follows:
1.That the wife shall pay the husband’s costs of 17 December 2010, such costs to be agreed within 21 days of the date of these orders, and failing agreement, to be taxed.
2.That the husband shall pay the wife’s costs, on an indemnity basis, of 3½ days’ of the 5-day hearing ending 11 November 2010, and of the proceedings (in addition to the costs already to be taxed pursuant to the orders of 14 December 2007, 20 March 2008 and 17 December 2009, and the costs fixed at $4,178 but outstanding pursuant to the order of 25 March 2009), such costs to be agreed within 21 days of the date of these orders, and failing agreement, to be taxed.
3.That the sum to be paid by the wife to the husband in paragraph 1 of these orders shall be off-set against the sum to be paid by the husband to the wife in paragraph 2 of these orders.
4.That the husband shall pay to the wife interest from 22 January 2011 at the rate prescribed by the applicable Rules of Court or so much of the money ordered to be paid by paragraph 3 of the orders of 17 December 2010 as is from time to time unpaid.
I certify that the preceding sixty nine (69) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dessau delivered on 31 March 2011
Associate:
Date:
Key Legal Topics
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Family Law
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Civil Procedure
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