Torda and Secretary, Department of Family and Community Services
[2004] AATA 338
•1 April 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 338
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2003/1560
GENERAL ADMINISTRATIVE DIVISION ) Re PENELOPE TORDA Applicant
And
SECRETARY DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Dr J D Campbell, Member Date1 April 2004
PlaceSydney
Decision The Tribunal sets aside the decision under review and in substitution therefor determines that pursuant to section 1184K(1) of the Act:
(1) special circumstances exist in this matter; and
(2) the whole of the compensation payment is to be treated as not having been made; and
(3) in the absence of any compensation payment having been made, a preclusion period does not exist; and as such
(4) compensation affected payments cannot be recovered by the Respondent, and in the event that such payments have been recovered they are to be repaid to the Applicant.Dr J D Campbell Member
CATCHWORDS
SOCIAL SECURITY - Compensation affected payments - Compensation Part of a lump sum compensation payment - Preclusion period - Commencement thereof - Special circumstances - Unfairness - Decision set aside.
Social Security Act 1991 (Cth) sections 17, 1169, 1170, 1184K
Australian Iron & Steal Pty Ltd v Government Insurance Office of NSW [1977] 2 NSW LR 446
Australian Iron & Steal Pty Ltd v Government Insurance Office of NSW [1978] 2 NSW LR 59
Jackson v Secretary, Department of Family and Community Services (1997) 1111 FCR 64
Kirkbright v Secretary, Department of Family and Community Services (2000) 32 AAR 120
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Haidar v Secretary, Department of Social Security (1998) 28 AAR 288
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Secretary Department of Social Security v Ellis (1997) 214 FCA (8 April 1997)
Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64
REASONS FOR DECISION
1 April 2004 Dr J D Campbell, Member 1. Mrs Torda seeks a review of the decision of the Social Security Appeals Tribunal dated 27 August 2003 that affirmed a decision made by an authorised delegate at Centrelink on 22 May 2002 to raise and recover compensation affected payments (age pension) made to the Applicant during a preclusion period of 124 weeks which commenced on 6 January 2000 and ceased on 22 May 2002. An authorised review officer had affirmed the latter decision on 26 March 2003.
2. Mrs Torda had been employed by the Department of Corrective Services (NSW) at the time she ceased work on 28 September 1994 because of a work related injury. Mrs Torda was declared unfit for work on 25 June 1996. Mrs Torda received weekly periodic payments from 28 September 1994 until 5 January 2000 totalling $74,905. Mrs Torda turned 60 on 20 July 1999 and commenced receiving age pension payments on 6 January 2000.
3. Mrs Torda commenced proceedings in the District Court against the Department of Corrective Services in respect of injuries suffered as a result of her employment. On 30 June 2002 Judge Black in his judgment awarded damages to Mrs Torda in the amount of $139,936 for Past Economic Loss, with $74,905 paid by way of periodic payments to be deducted, leaving a residual amount of $65,031. Mrs Torda was also awarded $9,795.52 for past loss of superannuation. No award for future economic loss was made as the judge had concluded that Mrs Torda would have ceased working at the age of 60.
4. Centrelink calculated a preclusion period by adding the amounts for Past Economic Loss ($65,031) and past loss of superannuation ($9,795.52) and dividing the total by $602, being the current divisor at the time. As a consequence a preclusion period of 124 weeks was nominated, with Centrelink determining that the commencement of the preclusion period was 6 January 2000 (the day after cessation of periodic payments), with the end date being 22 May 2002. Centrelink determined on 16 November 2002 that Mrs Torda was paid age pension amounting to $20,272.15 during the preclusion period, and that this was an amount that should be recovered from Mrs Torda.
5. On 26 March 2003 an authorised review officer affirmed the earlier decision, and in turn the Social Security Appeals Tribunal affirmed this decision on 27 August 2003.
issues
6. The relevant issues to be considered in this matter are:
(a) whether the Respondent, in seeking to recover the compensation affected payment of $20,272.15 has correctly interpreted the provisions contained within section 17 and 1170 of the Social Security Act 1991 (“the Act”), and if so;
(b) whether special circumstances exist which would allow consideration to be given to either part or whole of the compensation payment being disregarded pursuant to section 1184K of the Act.
7. The Tribunal, having addressed the material placed before it and for the reasons detailed later in this decision finds that:
(a) the Applicant did receive weekly periodic compensation payments in the amount of $74,905 for work related injuries during the period 28 September 1994 and 5 January 2000;
(b) the Applicant did receive an award for damages for the same work related injuries on 30 June 2002 pursuant to a decision by Judge Black in the District Court of New South Wales. The damages awarded included $139,936 for Past Economic Loss which was reduced by the amount of periodic payments ($74,905) resulting in a net figure of $65,031. A further damages sum of $9,795 for lost superannuation was awarded. There was a nil award for future economic loss as Judge Black considered the Applicant would have ceased working by age 60;
(c) that the payment of weekly periodic payments between 28 September 1994 and 5 January 2000 were of a dual character, namely payments made pursuant to the New South Wales Workers Compensation Act and "payments on account of damages for which credit would have to be given if damages were later recovered." (Glass J, Australian Iron & Steel Pty Ltd v Government Insurance Office [1978] 2 NSW LR 59 at 62);
(d) that pursuant to section 17(2) of the Act the amount of compensation paid in this matter is $74,826, this being a lump sum amount awarded by Justice Black for Past Economic Loss and lost superannuation;
(e) that pursuant to section 17(3)(b) of the Act, the compensation part of the lump sum compensation payment is $74,826;
(f) that the Applicant did receive periodic payments and a lump sum compensation payment, and pursuant to section 1170(1) of the Act, the lump sum preclusion period commences on 6 January 2000. Further pursuant to subsections 1170(4) and (5) of the Act, the length of the preclusion period is 124 weeks, with the preclusion period ceasing on 22 May 2002;
(g) that pursuant to section 1169(1) of the Act, compensation affected payments are not payable during the lump sum preclusion period and as such an amount of $20,272.15 constitutes an overpayment, with the Applicant owing a debt of that amount;
(h) that pursuant to section 1184K of the Act, special circumstances are found to exist and pursuant to s 1184K(1), the compensation payment of $74,826 is treated as not having been paid;
(i) that the decision under review is set aside, with an outcome that results in the absence of a preclusion period in this matter, with the Respondent not being able to recover the compensation affected payment of $20,272.15, or if indeed recovery has already been effected, such an amount be repaid to the Applicant.
consideration and findings
8. In acknowledging that there is no contention as to the facts in this matter between the parties, the Tribunal makes the following finding of facts:
·The Applicant was employed by the Department of Corrective Services (NSW) when she suffered a work-related injury on 28 September 1994.
·The Applicant returned to work briefly in early 1995, had ceased work prior to April 1995 and was declared unfit for work on 25 June 1996.
·The Applicant received weekly periodic payments for the relevant period between 28 September 1994 to 5 January 2000 in the amount of $74,905.
·The Applicant turned 60 on 20 July 1999.
·The Applicant commenced receiving age pension payments on 6 January 2000.
·The Applicant was awarded damages in respect of her work-related injuries by way of a judgement on 30 June 2002.
relevant damages noted as:
· An amount of $139,936 for Past Economic Loss, reduced by an amount of $74,905 for prior payment of part economic loss (periodic payments) leaving a net amount of $65,031.
· A nil amount for future loss of earnings as it was considered that the Applicant would not work beyond 60 years of age.
· Calculations for damages for Past Economic Loss involved consideration of lost earning up to 20 July 1999 (date of 60th birthday), while periodic weekly payments continued until 5 January 2000.
· A past loss of superannuation of $9,795.52.
9. In addressing the factual issues within the relevant statutory framework the Tribunal observes that section 17(2) of the Act defines the word "compensation" for the purposes of the Act as:
“ (a) a payment of damages; or
………………………
(d) any other compensation or damages payment (whether the payment is in the form of a lump sum or in the form of a series of periodic payments)….that is made wholly or partly in respect of lost earnings or lost capacity to earn; and…”
Accordingly the Tribunal concludes that the Applicant did receive a payment of damages of $65,031 for past economic loss and $9,795 for lost superannuation, which together amount to $74,826.
10. Section 17(3) of the Act defines the compensation part of the lump sum compensation payment. In this matter see section 17(3)(b) of the Act is the relevant subsection and this provides:
“17(3)(b) if those circumstances do not apply-so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn.”
Accordingly the Tribunal finds that the compensation part of the lump sum compensation payment in this matter is $74,826.
11. In turning to the issue of the lump sum preclusion period the Tribunal again notes the relevant statutory framework contained within section 1170 of the Act.
“SECTION 1170
1170(1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b) ends at the end of the number of weeks worked out under subsections (4) and(5).
1170(2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:
(a) begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
1170(3) If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a) begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b) ends at the end of the number of weeks worked out under subsections (4) and payments in the form of a lump sum, the lump sum preclusion period is the period that:
(a)begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).”
12. In assessing which is the appropriate subsection to calculate the lump sum preclusion period, the Applicant raised three arguments in support of the contention that the appropriate subsection to apply was subsection 1170(3). The three arguments are briefly stated as:
(a) Subsection 1170(1) is concerned with a situation where an individual receives periodic payments and by way of redemption or commutation of those periodic payments a lump sum payment.
(b) The Applicant received an award of damages, and that any prior periodic payments were assessed and subtracted from the damages awarded for Past Economic Loss as part of a procedural process defined within the NSW Compensation Act. In so stating that, the Applicant received an award of damages, and that while periodic payments had previously been received by the Applicant, their character as periodic payments was altered by the procedural process whereby they are treated as an offset for the damages awarded for economic loss, that is the periodic payments assume a character of part payment of damages. Accordingly subsections 1170(1) and (2) do not apply, for the reason that the Applicant’s periodic payments no longer retained their character.
(c) In the circumstances of this matter, subsection 1170(3) is the appropriate subsection upon which to base a calculation of the preclusion period, for use of either of the other two subsections results in an outcome which is unfair and unjust to the Applicant, with any calculation under section 1170(2) not being appropriate in this matter.
13. The Tribunal does not concur with any of the three arguments for the following reasons:
(a) the language used in section 1170(1) is neither ambiguous nor is it unnecessary complex. It speaks of a person receiving both periodic compensation payments and a lump sum compensation payment. The term compensation payment is clearly defined within section 17(2) of the Act with a lump sum included within subsection 17(2)(d). It is apparent to the Tribunal that the definition of compensation would include both the following situations:
(i) where an individual receives periodic payments and such payments are redeemed or commuted by way of payment of a lump sum;
(ii) where an individual receives periodic payments and is awarded damages for economic loss by way of a payment of a lump sum, albeit with an offset having been made for previously paid periodic payments.
Accordingly the Tribunal is unable to accept that section 1170(1) of the Act only applies to a situation where periodic payments are redeemed or commuted.
(b) In this matter it is clear that periodic payments were made and that the sum of the periodic payments was an offset to the quantum of damages made under a judgement award for Past Economic Loss. The Tribunal, having had its attention drawn to the decisions in Australian Iron & Steel Pty Ltd v Government Insurance Office of New South Wales [1977] 2 NSW LR 447, Australian Iron and Steel Pty Ltd v Government Insurance Office of New South Wales [1978] 2 NSW LR 59 and Jackson v Secretary, Department of Social Security [1997] 1111 FCA, makes the following observations:
(i) a periodic payment is a payment made pursuant to a compensation act for a lost capacity to earn. It is evident that this is the character of such a payment ;
(ii) the sum of periodic payments is equally a compensation sum on account of a loss of capacity to earn over a defined period of time and reflects an amount of compensation for a lost capacity to earn or past economic loss for a defined period;
(iii) the award of damages by way of judgement for past economic loss requires as an adjustment to the gross amount of damages awarded for Past Economic Loss for a defined period any amounts paid by way of periodic payments to arrive at a net loss award figure for Past Economic Loss;
(iv) while liability for compensation payments and liability for damages payments arise from independent heads of liability, with relevant payments bearing the character of its origins, payments made by way of compensation have a dual character, namely the payment made by way of liability arising in compensation and payments on account of damages for which credit would have to be given if damages were later recovered. As a consequence the compensation and damages are two interrelated sums and are not two sums independently calculated by reference to separate consideration. (Australian Iron & Steel Pty Ltd v Government Insurance Office of New South Wales supra per Glass J at 63,64).
The Tribunal concludes that the payment of periodic payment and the character of such payment is not lost as a consequence of a court awarded damages payment for Past Economic Loss. Accordingly the Tribunal rejects the Applicant's arguments that there was a change in the character of such payments and that the preclusion period should not be calculated in accordance with section 1170(1) of the Act.
14. The Tribunal, in addressing the Applicant’s third contention that calculation of a preclusion period pursuant to section 1170(1) of the Act would result in an outcome that was unfair and unjust to the Applicant, notes that such an outcome is derived by consideration of particular hypothetical circumstances. The Applicant submitted that calculation of a preclusion period pursuant to section 1170(1) of the Act would result in a financial disadvantage to the Applicant when compared to circumstances where the Applicant had not suffered any injury, or either had not for any reason received periodic payments or had not received any compensation payments; as for example if the compensation payments (periodic) were to lose their character as a consequence of a damages award. The Tribunal finds that the construction suggested by the Applicant that the preclusion period calculation should be calculated by selecting a calculating process within section 1170 of the Act that causes no financial disadvantage to the Applicant by its strict application is a construction which is not appropriate for the following reasons:
(a) while it is evident that calculation of the preclusion period with reference to section 1170(1) of the Act results in a preclusion period extending from 6 January 2000 to 22 May 2002 and a resulting requirement of the Applicant to repay a compensation affected payment debt of $20,272.15, such a calculation is consistent with the factual circumstances of the matter;
(b) while it is also evident that if the Applicant did not have an injury at work, or indeed if she did, and for whatever reason no compensation payments were made prior to the damages award, the financial position of the Applicant would have been advantaged in both situations by in both cases the amount of the age pension payments received between 6 January 2000 and 22 May 2003, namely $20,272.15. In the former hypothetical the Applicant would have received the age pension by way of age and having ceased work at 60 and in the latter, because the preclusion period calculation would have been made by reference to section 1170(3), with the preclusion commencing and ending prior to the Applicant's sixtieth birthday or shortly thereafter;
(c) while such hypotheticals suggest a more financially advantageous outcome to the Applicant and the direct inference that the outcome using a section 1170(1) calculation is both unfair and unjust, the Tribunal must deal with the facts as found and the calculation of a preclusion period in accordance with the relevant section in the Act. That other variances to the factual situation highlight more financially advantageous outcomes for the Applicant is of little consequence in the construction of a section, which clearly defines what facts must exist before moving to a subsection defining the preclusion period which is consistent with the found facts. To do otherwise is to ignore the nominated requirements of the Act, as well as the purpose for which both the Act and the particular section are intended;
(d) that section 1170(2) is not an appropriate section under which a calculation of the preclusion period should be calculated, as there is an absence of the necessary facts - namely part reduction of periodic payments;
(e) that section 1170(3) only applies if sections 1170(1) or (2) do not apply, clearly defines that an option to use section 1170(3) for the calculation of a preclusion period can only be used in the nominated circumstances and not as an option. The Tribunal has already concluded that section 1170(1) is the operative section in this matter, pursuant to the finding of fact that has been made.
15. Resulting from the Tribunal's rejection of the Applicant's arguments is the creation of a preclusion period pursuant to section 1170(1) of the Act which extends for a period of 124 weeks from 6 January 2000 to 22 May 2002. As a consequence the Tribunal further finds that the Applicant has been paid a compensation affected payment during this period and as such an amount of $22,272.15 is an amount owed by the Applicant to the Commonwealth.
special circumstances
16. Section 1184K provides:
“1184K(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
1184K(2) If:
(a) a person or a person's partner receives or claims a compensation affected payment; and
(b) the person receives compensation; and
(c) the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person's or the person's partner's receipt of, or claim for, the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).”
17. In this matter the Tribunal has already found that the Applicant received compensation for a work-related injury and the compensation affected payment related to age pension payments. It is clear to the Tribunal and the Tribunal so finds that the set of circumstances that gave rise to the payment of compensation and the compensation affected payment are unrelated. The Tribunal recognises that this alone does not constitute special circumstances pursuant to section 1184K(2) of the Act.
18. In addressing other matters which may constitute consideration as special circumstances, the Tribunal is mindful that no additional issues of a personal nature were raised by the Applicant. This leaves for consideration the circumstances surrounding the lump sum compensation award and the creation of a preclusion period commencing 6 January 2000, and whether the outcome between the interdependent issues can be considered harsh, unfair and unjust.
19. The arguments in support of such an outcome being considered unjust, unfair and harsh are:
· The Applicant only received a damages award for past economic loss, with such economic loss only being calculated to the Applicant's sixtieth birthday, namely 20 July 1999.
· No damages were awarded for future economic loss as the Judge considered that the Applicant would not have worked beyond 60 years of age.
· Periodic payments were ceased on 5 January 2000 and age pension payments commenced on 6 January 2000.
· A court awarded damages which were handed down on 30 June 2002.
· That the resultant imposition of a preclusion period has resulted in the Applicant being liable to repay the compensation affected payments of $20,272.15.
· That such repayment is unfair and unjust for the reasons that no award was made for future economic loss, as the Judge considered that the Applicant would not have worked beyond 60.
· That the Applicant, as the result of the preclusion period was left with no income support for that period, and the damages awarded did not extend into the preclusion period.
· That in this matter there is, as a consequence of the damages award, no question that an issue of double dipping arises. Indeed the Applicant argues that the outcome results in a significant financial disadvantage as the Applicant was neither compensated for future loss of earnings nor would social security payments be payable during the preclusion period. It is the result of the strict application of the Act that the Applicant submits constitutes special circumstances, in that the result is clearly unfair, unjust and harsh. It is this circumstance when coupled with the set of circumstances that led to the compensation payment and the set of circumstances that gave rise to the compensation affected payment being unrelated that the Applicant contends constitute special circumstances pursuant to section 1184K of the Act.
20. The Tribunal, having considered that “the purpose of the basic thrust of the legislation was to avoid a claimant being entitled both to social security benefits and benefits in the nature of income through lump sum payments", (Haidar v Secretary, Department of Social Security (1998) 28 AAR 288 at 297 per Hill J) notes the following decisions which clearly define circumstances which are derived as a result of strict application of the Act and result in circumstances which have been considered unfair, unjust and harsh. Further such circumstances have been found to be of such a nature as to be adjudged special circumstances :
(a) In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 where Kiefel J observes:
"…it would require something to distinguish Mr Groth's case from others, to take it out of the casual or ordinary case… it would of cause follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary…"
(b) In Haidar v Secretary, Department of Social Security (1998) 28 AAR 288 at 297 Hill J observes:
"…Without putting too fine a point upon it, the purpose of the basic thrust of the legislation was to avoid a claimant being entitled both to social security benefits and benefits in the nature of income through lump sum payments…"
(c) In Secretary,Department of Social Security v Smith (1991) 30 FCR 56 a deprivation of a rightful entitlement to sickness benefit was denied on the basis compensation had been paid for it, when in actual fact it had not, was found to constitute circumstances which were unjust.
(d) In Secretary, Department of Social Security v Ellis [1997] 214 FCA (8 April 1997) a further issue was deemed relevant in considering whether or not the circumstances could be considered special, namely the absence of any relationship between the events giving rise to the compensation payment and to the events resulting in a compensation affected payment.
(e) In Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 Merkel J stated at 71:
"…In Smith, to which I will later return, von Doussa J rejected a contention put on behalf of the Secretary that 'the circumstances of the case' should be confirmed to matters which are external to the operation of the statutory scheme. His Honour made the point, with which I respect fully agree, that a distinction cannot meaning fully be drawn between matters external to the operation of the scheme and matters which are the product of the strict application of the scheme…"
(f) In Kirkbright v Secretary, Department of Family and Community Services Mansfield J stated at 125:
"…Indeed, in my view, section 1184 is designed specifically to enable the Respondent, and on review the Tribunal, to ameliorate such unfairness or injustice when it appears by virtue of the strict application of the Act…"
and at 128:
"…It is but another way of putting the proposition that injustice on unfairness by the strict application of the Social Security Act 1991 (Cth) can not of itself amount to a special circumstance for the purposes of section 1184. That is a preposition, which, as I have noted, has been rejected by a number of decisions of the Court as far back as Smith and Beadle…"
21. In the light of the authorities outlined, the Tribunal concludes that the strict application of the Act has resulted in an outcome which is unfair and unjust to the Applicant. In so stating the Tribunal, in again noting that the Applicant was not awarded damages for future economic loss in the judgement of 30 June 2002, that damages for Past Economic Loss were awarded up to Applicant's sixtieth birthday, namely 20 July 1999; that periodic payments paid to 5 January 2000 were deducted from the gross damages award for past economic loss; that age pension payment commenced on 6 January 2000, concludes that any issue of double payment does not exist in this matter, as a consequence of the explicit terms of the damages award in the judgement of 30 June 2002. Further as a consequence of the imposition of a preclusion period of 124 weeks commencing 6 January 2000 pursuant to a strict application of the Act, the Applicant has been deprived of 124 weeks of age pension payments, during a period for which she received no compensation by virtue of the judgement of June 2002. This the Tribunal finds to be unfair and unjust.
22. In the light of the Tribunal's findings that the set of circumstances that gave rise to the claim for compensation was not related to the set of circumstances that gave use to the Applicant's receipt of compensation affected payments and the finding that strict application of the Act has resulted in an outcome which is unfair and unjust in the circumstances detailed in this matter, the Tribunal concludes that for these reasons the circumstances outlined in this matter constitute special circumstances.
23. The Tribunal, pursuant to section 1184K(1) of the Act, having concluded that special circumstances do exist in the matter determines to treat the whole of the compensation payment as not having been made. In exercising the nominated discretion within section 1184K(1), the Tribunal noted again the particulars as to the date and quantum of the damages award for economic loss, the absence of payment for future economic loss and the date on which age pension payments commenced, the absence of any double payment in effect, and a financial detriment resulting to an individual as a consequence of a strict application of the Act, otherwise where indeed there has been no "double payment" .
determination
24. The Tribunal sets aside the decision under review and in substitution therefor determines that pursuant to section 1184K(1) of the Act:
(1) Special circumstances exist in this matter; and
(2) The whole of the compensation payment is to be treated as not having been made;
(3) In the absence of any compensation payment having been made, a preclusion period does not exist; and as such
(4) Compensation affected payments cannot be recovered by the Respondent, and in the event that such payments have been recovered they are to be repaid to the Applicant.
I certify that the 24 preceding paragraphs are a true copy of the reasons for the decision herein of
Signed: Neil Glaser
AssociateDate of Hearing 6 February 2004
Date of Decision 1 April 2004
Counsel for the Applicant Mark Daley
Solicitor for the Applicant Michael Tran
Advocate for the Respondent Luke Carter
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