Webster & Glover (No. 2)
[2021] FamCA 127
•16 March 2021
FAMILY COURT OF AUSTRALIA
Webster & Glover (No. 2) [2021] FamCA 127
File number(s): BRC 11228 of 2016 Judgment of: BAUMANN J Date of judgment: 16 March 2021 Catchwords: FAMILY LAW – Where there is a preliminary question as to whether there is property not covered by the terms of the binding financial agreement – Where the Court finds that the binding financial agreement covers all interests Legislation: Family Law Act 1975 (Cth) ss 90KA, 90SA Cases cited: Frederick & Frederick (2019) FLC 93-900
Jones & Dunkel (1959) 101 CLR 298
Number of paragraphs: 36 Date of hearing: 22 September 2020 Place: Brisbane Counsel for the Applicants: Mr J Bunning Solicitor for the Applicants: Damien Greer Lawyers Counsel for the Respondents: Mr J Cahill Solicitor for the Respondents: Saunders & Co Solicitors ORDERS
BRC 11228 of 2016 BETWEEN: MR WEBSTER
First Applicant
S PTY LTD
Second Applicant
AND: MS GLOVER
First Respondent
R PTY LTD
Second Respondent
ORDER MADE BY:
BAUMANN J
DATE OF ORDER:
16 MARCH 2021
THE COURT ORDERS:
1.That these proceedings be adjourned for Case Management Hearing for pronouncement of orders at 9.30am on 8 April 2021 in the Family Court of Australia at Brisbane.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Webster & Glover has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BAUMANN J:
INTRODUCTION
By Orders made 17 December 2018, for Reasons published on 16 November 2018 by Judge Jarrett, a de facto financial agreement dated by the parties on 1 July 2010 (hereafter called the “BFA”) was found to be binding upon the parties and the Application by Ms Glover to set aside the agreement on a number of grounds, was dismissed. Subsequently the proceedings were transferred to the Family Court of Australia.
However, that determination did not bring these proceedings in this Court to an end.
The Applicant Mr Webster had initially commenced proceedings in the Federal Circuit Court of Australia in November 2016 seeking inter alia, that the financial agreement was binding, however since that date numerous applications have been filed and determined both in the Federal Circuit Court of Australia and now the Family Court of Australia.
Simply expressed, the hearing before me on 22 September 2020, when Mr Bunning of Counsel appeared for Mr Webster and Mr Cahill of Counsel appeared for Ms Glover was a discrete hearing listed by Order made 9 July 2020, identified by the Order made on that day in these terms: “That the preliminary question as to whether there is property not covered by the terms of Financial Agreement dated 1 July 2010 is listed for Hearing”.
The parties were not required for cross-examination at the hearing, with:
(a)Mr Webster relying on oral submissions delivered that day by Mr Bunning and written submissions filed 18 September 2020 contending that:
53.The intention of the Agreement is clear. It is to deal with all of the parties’ property and financial resources in the event of a breakdown of the relationship. There is nothing it is submitted that sits outside of the Agreement that is capable of division between these parties.
54.Further, many of the contentions of the Respondent are the same as those contentions she ran before Judge Jarrett which found no favour with the Court.
55.The Agreement has been found to be binding. The Court has found that it is a contract capable of execution.
56.The matter is at an end. The Application of the Respondent should be dismissed.
(b)Ms Glover relying on oral submissions delivered that day by Mr Cahill and written submissions filed 11 September 2020 contending in conclusion that:
25.It is the expert evidence of Mr HH together with the adverse inference that can be drawn against the Applicant for his failure to disclose all his financial interests, which allows the court to be satisfied that the Queensland businesses are not covered by the BFA and as such, allow the Respondent to seek a property adjustment order under s90SM of the Act.
It is helpful to provide a summary of material facts by way of background to establish a context for the legal discussion and conclusions which follow.
CONTEXTUAL HISTORY
Mr Webster, now aged 70 and Ms Glover, now aged 59, lived together from April 2010 to June 2015, but did not marry. Although the BFA purports to have been made on 1 July 2010, Judge Jarrett (at [11]), found it was impossible to make a finding about the date upon which the agreement was, in fact, signed although his Honour found “it is likely that the agreement was signed on or about 18 November, 2010”. Nothing turns on the date for this discrete hearing – because critically it is not disputed that the Queensland businesses were acquired after the BFA came into effect.
The extensive Reasons of Judge Jarrett inter alia found:
(a)the financial agreement met the requirements of s 90UC of the Family Law Act 1975 (Cth) and is a Part VIIIAB financial agreement ([26]);
(b)there was no operative misrepresentation by Mr Webster arising out of the content of Schedule 2 to the parties’ financial agreement or any omission by him ([63]);
(c)the parties had each received independent legal advice as required and been provided with a signed statement by their respective legal practitioners as required ([69] to [71]);
(d)that the acquisition of the management rights businesses via corporate vehicles “is not inconsistent with clause 8” of the BFA because:
a)it is the corporate vehicles which have purchased the relevant property – the management rights and perhaps real estate attached to those rights;
b)the parties’ interests in those businesses are only indirect in the sense that they are shareholders in the corporate entities that conduct the businesses (where they are each shareholders); and
c)in most cases, however, the shareholders in the relevant companies are not the parties themselves, but corporate vehicles (that is to say separate legal entities) in which the parties directly or in directly have an interest. [([81])]
(e)clause 8 is only engaged in the event that the parties acquired property jointly ([82]) and Mr Webster had not “repudiated” the agreement ([83]) and the financial agreement had “not been terminated” ([84]);
(f)the financial agreement should not be set aside as being void, voidable or unenforceable because:
(i)it is not uncertain ([89]); or
(ii)enforcement of the agreement in reliance upon its terms by Mr Webster is not unconscionable ([97]);
(g)Ms Glover’s argument that the agreement has been frustrated “cannot succeed” ([98]).
No Appeal against the Order of Judge Jarrett was filed.
I agree with the submission of Mr Bunning for Mr Webster that the discrete hearing relates to a dispute about the construction of a contract and for these Reasons, the evidence of Mr HH, a forensic accountant retained by Ms Glover, whilst relevant if the Court finds there are property interests not covered by the BFA, is not relevant to the construction issue.
Before I turn to the respective submissions of the parties, it is necessary to refer to some of the relevant provisions in the BFA (although they are recorded in the earlier Reasons of Judge Jarrett).
RELEVANT CLAUSES IN BFA
The Court is required (by s 90KA) to apply the “principles of law and equity” in determining the construction of a BFA and recently the Full Court in Frederick & Frederick (2019) FLC 93-900 at [85] said the relevant principles to be applied in construing such an agreement:
… were conveniently stated by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104:
46.The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
I note the following relevant provisions of the BFA, noting further that the Part VIIIAB – Division 2 – does not apply to certain maintenances, declarations of property interests and alterations of property interests where a binding financial agreement applies (s 90SA), namely:
(a)Recital K refers to Schedule 1 as being the assets and financial resources of which Ms Glover was the owner at the date of the Agreement;
(b)Recital L refers to Schedule 2 as being the assets and financial resources of which Mr Webster was the owner at the date of the Agreement;
(c)clause 4 and 5 provides an acknowledgement that neither of them has made a contribution of a financial nature to the acquisition, conservation or improvement of the assets of the other or are entitled to any benefit from any of the assets or financial resources set out in the respective Schedule;
(d)The importance of clauses 6, 7 and 8 require them to be recorded fully:
6.Ms Glover shall make no claim at law or in equity in relation to any further property that Mr Webster acquires in his sole name with money accumulated form his sole earnings or other income received by him during the relationship.
7.Mr Webster shall make no claim at law or in equity in relation to any further property that Ms Glover acquires in her sole name with money accumulated form her sole earnings or other income received by her during the relationship.
8.If any property is acquired jointly during the relationship, the parties shall acquire that property as tenants in common in equal shares. The parties shall contribute equally towards any loan repayments if they are required to borrow money, either in relation to the acquisition of the property or in relation to the subsequent improvement of the property. They shall be equally liable for the repayment of the loan. Within 30 days of the date of separation, the parties shall do all acts and things and sign all necessary documents in order to sell all jointly-acquired property. The manner of sale shall be determined by the proper officer of the Auctioneers and Valuers Association or his nominee. The net proceeds of sale of the property shall be equally divided after deduction of all sale expenses, including GST, selling agents fees, legal costs of the sale and any outstanding loans secured against the property.
(e)Clause 12 provides that:
12.Except as provided above, the parties are entitled to be the sole legal and beneficial owners of all other items of property, both real and personal, including superannuation entitlements, which are registered in each of their names or in their current possession or control.
PLEADINGS
As a consequence of directions made by Judge Jarrett on 17 December 2018, Ms Glover filed a “Points of Claim” and a Reply, whilst Mr Webster filed a Defence.
Relevantly, Ms Glover pleaded that:
Property available for an order pursuant to s.90SM of the Family Law Act 1975 (Cth)
5.All property of the parties including any interest acquired indirectly in a company, trust or other entity; property of the parties acquired post co-habitation including any interest acquired indirectly in a company, trust or other entity which was not acquired jointly as tenants in common in equal shares or in the sole name of either of the parties, being acquired with that party’s sole earnings or other income received during the relationship. The property to which this paragraph refers is particularised further in this pleading.
Property covered by the binding financial agreement
6.Property described in the schedules of the BFA and property acquired after the execution of the binding financial agreement jointly as tenants in common in equal shares or in the sole name of either of the parties, being acquired with that party’s sole earnings or other income received during the relationship.
Property that is not covered by the binding financial agreement
7.Property acquired after the execution of the financial agreement other than jointly as tenants in common in equal shares or in the sole name of either of the parties, being acquired with that party’s sole earnings or other income received during the relationship and in in particular does not cover any interest acquired indirectly in a company, trust or other entity.
The contributions made on behalf of the parties to the acquisition, conservation or improvement of any of the property of the parties not covered by the binding financial agreement
8.Assets were acquired by the parties after the execution of the binding financial agreement.
Particulars
The assets acquired after the execution of the binding financial agreement include:
(a)the shares in the following corporations which acquired each of the managements rights businesses as indicated opposite the corporation name.
i.K Pty Ltd ABN … registered on 12 January 2009 – the K Apartments;
ii.J Pty Ltd ABN … registered on 23 June 2011 – the J Apartments Complex;
iii.P Pty Ltd ABN… registered on 25 January 2012 – the L Apartments;
iv.M Pty Ltd ABN… registered on 14 November 2012 – The M Apartments;
v.N Pty Ltd ABN … registered on 11 December 2014 – the N Pty Ltd Apartments;
vi.P Pty Ltd ABN… registered on 21 April 2015 – P Pty Ltd Apartments; and
(b)Q Pty Ltd ABN … registered on 19 November 2012 – “Q Pty Ltd” Business.
(c)The property at BB Street, CC Town, QLD with Lot/Plan … which was acquired for $1.69 million.
Although the property at BB Street, CC Town is referred to in this pleading, it is uncontentious that the property was purchased on 30 August 2012 in the sole name of Mr Webster, borrowing funds from S Pty Ltd. Clause 4 of the BFA applies to this Asset and in submissions made by Mr Cahill for Ms Glover, no submission to the contrary was made in writing or orally.
Mr Webster in his Defence states:
Property available for an order pursuant to s.90SM of the Family Law Act 1975 (Cth)
3.As to paragraph 5 of the Statement of Claim, the Applicants:
(a)Deny that ‘all property of the parties including any interest acquired indirectly in a company, trust or other entity’ is property available for division pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”) and say that any property or financial resources covered by the Financial Agreement is not available for an order pursuant to s 90SM because:
i.On 17 December2018 Judge Jarrett made an Order that the financial agreement dated 1 July, 2010 and signed by the parties is binding; and
ii.Section 90SA(1) of the Act provides that Division 2 of Part VIIIAB does not apply to the maintenance of one of the spouse parties, the property of the spouse parties or of either of them or the financial resources of the spouse parties or of either of them where a Part VIIAB financial agreement that is binding on the parties to the agreement applies.
(b)Admit that the property of the parties acquired post co-habitation which was not acquired jointly as tenants in common in equal shares or in the sole name of either of the parties, being acquired with that party’s sole earnings or other income received during the relationship is property available for an order pursuant to s 90SM of the Act;
(c)Deny that the property of the parties acquired post co-habitation includes any interest acquired indirectly in a company, trust or other entity because it does not; and
(d)Says that the paragraph is inadequately particularised and ought to be struck out.
Property covered by the binding financial agreement
4.As to paragraph 6 of the Statement of Claim, the Applicants:
(a)Admit the allegation contained therein; and
(b)Say further that the binding financial agreement deals with the financial resources of each party as well as the property of each party.
Property that is not covered by the binding financial agreement
5.As to paragraph 7 of the Statement of Claim, the Applicants:
(a)Admit that property acquired after the execution of the financial agreement, other than jointly as tenants in common in equal shares or in the sole name of either of the parties, being acquired with that party’s sole earning or other income received during the relationship is property that is not covered by the financial agreement; parties, being acquired with that party’s sole earnings or other income received during the relationship is property that is not covered by the financial agreement;
(b)Deny that the binding financial agreement does not cover any interest acquired indirectly in a company, trust or other entity and say in addition that such interest is not property of the parties but a financial resource of the parties.
The contributions made on behalf of the parties to the acquisition, conservation or improvement of any of the property of the parties not covered by the binding financial agreement
6.As to paragraph 8 of the Statement of Claim, the Applicants:
(a)Admit the allegations contained therein, insofar as they refer to assets acquired after the execution of the binding financial agreement by companies, trusts or entities included in the Schedules of the Binding Financial Agreement, but say that the First Applicant did not acquire a beneficial interest in those companies, trusts or entities; and
(b)In the premises of the above, deny that assets acquired by the First Applicant after the execution of the binding financial agreement are not covered by the binding financial agreement.
Relevantly, the Reply filed by Ms Glover states:
2.As to paragraph 3(c) of the Defence, the Respondents say that the Applicants’ denial that property of the parties acquired post co-habitation includes any interest acquired indirectly in a company, trust or other entity is contrary to the Applicants’ written argument submitted to the Court, which binds the First and Second Applicants.
Particulars
The First Applicant’s Written Argument was filed on 18 October 2017 with this honourable Court. At paragraph 46 the First Applicant says, “We concede the proposition in paragraph 16(a) (of The Glover Defence) as being the true meaning of clause 8”. That is, the Financial Agreement does not cover property acquired after the execution of the financial agreement other than jointly as tenants in common in equal shares or in the sole name of either of the parties, being acquired with that party’s sole earnings or other income received during the relationship and in particular does not cover any interest acquired indirectly in a company, trust or other entity.
3.As to paragraph 6(a) of the Defence, the Respondents do not admit that the First Applicant did not acquire a beneficial interest in those companies, trusts or entities after the execution of the Binding Financial Agreement (“Financial Agreement”).
Particulars
Particulars will be provided after disclosure by the First and Second Applicants.
Much of the pleadings are directed to arguments advanced by Ms Glover (and either denied or put in issue by Mr Webster), as to the contributions made by the parties to the acquisition, conservation or improvement of any of the property of the parties not covered by the BFA, and as such are not relevant to the construction issue the subject of the discrete hearing before me.
SUBMISSIONS ON BEHALF OF MS GLOVER
The case advanced by Ms Glover is that:
(a)the shares in the management rights businesses (as identified at paragraph 8(a) of the Points of Claim) were acquired after the execution of the BFA and made “by way of the Respondent’s contributions”;
(b)the management rights businesses are owned by entities not listed under Schedule 2 of the BFA and are entities in which Mr Webster has a beneficial interest;
(c)the Applicant Mr Webster has failed to provide full and frank disclosure with respect to the interests and an adverse inference should be drawn (see Jones & Dunkel (1959) 101 CLR 298) (“Jones & Dunkel”). The submission does not identify the evidence that he has not disclosed – seemingly relying on the contention that a failure to properly disclose enlivens the inference to be drawn;
(d)apparently relying on the report of the forensic accountant Mr HH, the facts asserted by Ms Glover in support of her position include:
(i)NN Pty Ltd as Trustee of the Webster Education Discretionary Trust, nor the Trust, were disclosed in Schedule 2;
(ii)“shares” in NN Pty Ltd were used to purchase the first management rights building J Pty Ltd in October 2011 with the “shares” in J Pty Ltd later used to purchase the M Apartments management rights building;
(iii)MM Pty Ltd hold Mr Webster’s superannuation entities and his self-managed superannuation fund (“SMSF”);
(iv)Although Mr Webster asserts the Webster Education Discretionary Trust was a “testamentary trust”, it is currently “alive” as demonstrated by the receipt during the year ended 30 June 2018 of a franked dividend from H Pty Ltd;
(v)NN Pty Ltd and the Education Trust own a significant proportion of Mr Webster’s entities including MM Pty Ltd which holds his SMSF and other superannuation entities as well as H Pty Ltd. These entities were ultimately used to purchase many of the management rights entities that Ms Glover operated “on his behalf”;
(vi)Ms Glover “set up and operated these businesses using her skills and expertise in the apartment management industry”. She was not paid by Mr Webster to do so. Ms Glover submits that “both parties considered this arrangement to be a joint venture”;
(vii)Mr Webster had a “beneficial interest” in the entities which owned the management rights businesses and these entities were not listed in Schedule 2.
SUBMISSIONS ON BEHALF OF MR WEBSTER
The case advanced by Mr Webster is:
(a)to the extent that Ms Glover asserts that the interests disclosed at paragraph 15 of these reasons “were not disclosed in Schedule 2”, Mr Webster relies upon the findings at [60], [58] and [63] of the Judgment of Judge Jarrett, and for the reasons he gave for rejecting Ms Glover’s argument – his Honour finding no misrepresentation. I adopt those findings and his Honour’s careful analysis, including that MM Pty Ltd is specifically disclosed in Schedule 2;
(b)by reference to [51]-[54] of the Reasons for Judgment, Judge Jarrett found on the evidence (noting that he had the benefit of the witnesses being the subject of cross-examination) that:
(i)NN Pty Ltd, as Trustee of the Education Trust, held shares in H Pty Ltd which held shares in MM Pty Ltd;
(ii)all the property and financial resources held by H Pty Ltd and MM Pty Ltd had been fully set out in Schedule 2;
(iii)because of the mere expectancy as a beneficiary under the Education Trust held by Mr Webster, no rights of a proprietary nature exist in Mr Webster’s hands in respect of the assets, if any, of the Education Trust; and
(iv)at the time of the BFA coming into effect, there is no evidence to demonstrate the Trust had assets or income.
The assertion, relied upon by Ms Glover of the payment of a franked dividend to the Trust of $155,000 is irrelevant.
(c)To enliven relief under s 90SM, Ms Glover must identify property or interests that are not covered by the BFA, and in that respect, and on the evidence (including the documents tendered by Mr Webster (see Exhibit 2)), clause 4 of the BFA covers the interests held by entities (not personally by Mr Webster) in:
(i)K Pty Ltd;
(ii)J Pty Ltd;
(iii)L Pty Ltd;
(iv)M Pty Ltd;
(v)N Pty Ltd;
(vi)P Pty Ltd;
(vii)Inhabit Carindale; and
(viii)Q Pty Ltd.
(d)At paragraphs 49(a) to (h) of Mr Webster’s written submissions, the dates of establishment and the nature of the interest is identified;
(e)Each of the companies Ms Glover seeks to assert fall outside of the BFA in fact are ether contained in the Agreement or have resulted post the agreement from decisions taken by Mr Webster about his property and financial resources as properly disclosed.
DISCUSSION
Ms Glover asserts she made significant contributions after the agreement came into effect and in essence, to adopt the position asserted by Mr Webster would be to unjustly and unfairly remove any claims she has to property interests now held by Mr Webster (either directly or indirectly).
Of course, if there was property or interests not covered by the express terms of the BFA, then evidence about the value of those interests and the nature of the direct and indirect financial and non-financial contributions could by highly relevant to the exercise of a discretion under s 90SM.
However, by entering into the BFA, both parties acknowledged they did so on the express terms contained in the BFA in substitution for any rights they might otherwise have under the Act (see Recital 1).
I hold little doubt that Mr Webster has “made decisions in business and has on proper advice changed certain company structures for the benefit of taxation” (see paragraph 50 of the written submissions), but I would add also, with an eye to and with an understanding of the effect of the terms of the BFA.
The decision of Judge Jarrett might have been construed by Ms Glover as an indication that there was property and interests of Mr Webster not covered by the BFA (see for example [96]).
However, his Honour did not specifically make such a ruling.
On the evidence and the express terms of clause 4 of the BFA, I am satisfied that there is no property or financial interests of Mr Webster that is not covered by the BFA.
I agree with the clear interpretation and construction of the terms of the BFA, as contended for by Mr Webster. Ms Glover contends that indirect shareholdings through other corporate entities or trusts is the same as holding interests personally. I disagree.
To the extent that the Jones & Dunkel argument was advanced in written submissions by Mr Cahill, during the hearing he no longer pressed the submission. He was right to do so as it would not have been accepted for the reasons already given. Similarly, whilst much was made of a franked dividend received by the Education Trust from H Pty Ltd and the assertion it was contrary to sworn evidence given by Mr Webster at the hearing before Judge Jarrett on 21 August 2017, I say:
(a)there is no evidence any such dividend had been paid and received prior to 21 August 2017 so that any dividend disclosed in the accounts of the Trust for the year ended 30 June 2018 is not evidence of false evidence by Mr Webster;
(b)Whilst Mr Webster clearly gave evidence of the likely intentions of a testamentary trust, the functions of a trust can be many and varied and always subject to the terms of the deed of trust;
(c)In any event where, as I find, the interests are covered by clause 4, it is irrelevant what the Trust’s intentions and or income are post the agreement.
Mr Bunning made a final oral submission that:
(a)clause 8 does not enliven the powers under s 90SM but only goes to enforcement of the BFA. I agree with this submission; and
(b)even though Ms Glover asserts her interest in Q Pty Ltd is not covered by the BFA, that entity is in liquidation. Mr Webster concedes Ms Glover was the sole Director of that company since formation. The shareholding was as set out at paragraphs 16 and 17 of Mr Webster’s affidavit filed 18 February 2020. There are no assets available to the shareholders to distribute by way of dividend and I accept, regrettably, that both Mr Webster (through his entity S Pty Ltd) and Ms Glover (through her entity R Pty Ltd) have suffered loss through their investment in this venture. No utility arises from any further discussion of that entity. I agree; and
(c)I do not regard the “catch all” clause in the BFA at clause 17 to be particularly relevant. For example, if, contrary to my finding, there were property, financial resources or other interests not covered by the BFA, then clause 17 could not operate to remove any rights to pursue actions under s 90SM in respect of those interests.
CONCLUSION
For the reasons set out, the Application by Ms Glover must be dismissed.
In considering the terms of any final order, I am conscious of the fact that these proceedings were commenced by Mr Webster by Application filed 10 November 2016 and have therefore been on foot for over four years. Apart from seeking a declaration that the financial agreement is valid and binding, he also sought orders by way of enforcement directed to the “Q Management business” including Lot …, and a general application that “the agreement otherwise be enforced as if it was an Order of the Court”.
I did not hear any submissions as to the form of the order that effectively brings these proceedings, at least at the trial level, to an end. I have not “trawled” through the over four years of Applications in a Case and Responses to be confident that there are no further pending or unresolved applications.
Accordingly, this matter will be listed before me at 9.30am on Thursday, 8 April 2021 for pronouncement of final orders. If the parties are able to agree on the form of order consistent with these Reasons and the intent of the Court to finalise proceedings, then it can be submitted to chambers before 8 April 2021.
If a party wishes to pursue any application for costs still pending before the Court, they can inform the Court on 8 April 2021 and a timetable for any such application to be considered on written submissions will be set.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Baumann. Associate:
Dated: 16 March 2021
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