Wollongong Coal Limited T/A Wollongong Coal
[2019] FWCA 216
•15 JANUARY 2019
| [2019] FWCA 216 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Wollongong Coal Limited T/A Wollongong Coal
(AG2018/2488)
NRE NO 1 COLLIERY WORKPLACE AGREEMENT 2011
Coal industry | |
SENIOR DEPUTY PRESIDENT HAMBERGER | SYDNEY, 15 JANUARY 2019 |
Application for termination of the NRE No 1 Colliery Workplace Agreement 2011.
[1] On 7 June 2018, Wollongong Coal Limited (the applicant) applied to the Fair Work Commission under s.225 of the Fair Work Act 2009 (the FW Act) to terminate the NRE No 1 Colliery Workplace Agreement 2011 (the 2011 agreement).
[2] I issued directions on 28 June 2018 for the filing and service of written material by the applicant and the Construction, Forestry, Maritime, Mining and Energy Union (the respondent). A hearing was held in Sydney on 10 October 2018.
[3] The applicant was represented at the hearing by K Brotherson, of counsel, and the respondent by A Walkaden, National Legal Officer.
[4] The applicant tendered written evidence from:
• Sanjay Sharma, Company Secretary. 1
[5] The respondent tendered written evidence from:
• Dean Conkey (former Lodge President); 2
• Peter Colley (National Research Director); 3
• Robert Timbs (District Vice-President). 4
[6] Mr Sharma and Mr Timbs were cross-examined.
[7] The 2011 agreement was approved on 10 November 2011. 5 It has a nominal expiry date of 30 November 2015. The respondent is covered by the 2011 agreement.
[8] The applicant submitted that:
• Mining of coking coal at the applicant’s Russell Vale Colliery (Russell Vale, previously known as NRE No 1 Colliery) to which the 2011 agreement relates ceased in August 2015, and there have been no employees covered by the 2011 agreement since September 2015;
• Any resumption of mining at Russell Vale is dependent on the applicant securing approval for its revised Underground Expansion Plan (UEP) and the applicant undertaking the necessary capital investment and development works in order for production to recommence;
• The coking coal market is significantly less favourable than when the 2011 agreement was made, and the commercial environment the applicant currently operates in is difficult;
• The cost, operational restrictions and other inflexibilities imposed by the 2011 agreement are an impediment to the applicant recommencing operations at Russell Vale in a cost-efficient and flexible manner; and
• In the absence of any employees the applicant is unable to re-negotiate the 2011 agreement.
[9] The respondent submitted that:
• Termination of the 2011 agreement will make no material difference to the viability of Russell Vale;
• The difficulties faced by the applicant cannot be attributed to the 2011 agreement;
• The 2011 agreement is a typical enterprise agreement binding on a coal company in the Southern District. Many of the restrictions complained about by the applicant are expressed in similar, if not more restrictive, terms in the enterprise agreements binding on the other coal mining companies in the Southern District;
• The applicant wishes to have the ability to restart Russell Vale with a completely outsourced workforce – this is not a good reason to terminate the agreement. In any case the barrier that the 2011 agreement poses to that outcome are more imagined than real.
The relevant legislative provisions
[10] The statutory provisions concerning enterprise agreements are to be found in Part 2-4 of the FW Act. The Full Bench in Aurizon said about this part of the FW Act:
‘The legislative scheme therefore enables and facilitates good faith bargaining for an enterprise agreement. It also facilitates the making of enterprise agreements but does not mandate that result. Once an enterprise agreement is made and approved by the Commission, it seems clear that the legislative scheme does not intend that such agreements operate in perpetuity. Agreements have a finite nominal life. At the end of the nominal life of an agreement, bargaining parties may bargain for a new agreement utilising all of the tools available under the Act; or a person to whom an agreement applies may take steps to bring the agreement to an end in accordance with the provisions of the Act; or both may occur.’ 6
[11] Subdivision D of Division 7 of Part 2-4 provides for the termination of an enterprise agreement after its nominal expiry date. This subdivision consists of ss. 225, 226 and 227, the terms of which are as follows:
‘225 Application for termination of an enterprise agreement after its nominal expiry date
If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:
(a) one or more of the employers covered by the agreement;
(b) an employee covered by the agreement;
(c) an employee organisation covered by the agreement.
226 When the FWC must terminate an enterprise agreement
If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a) the FWC is satisfied that it is not contrary to the public interest to do so; and
(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:
(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and
(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.
227 When termination comes into operation
If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.’
[12] The application to terminate the 2011 agreement has been made under s.225. There are no employees who will be directly affected by termination of the agreement. Therefore, in accordance with s.226, the Commission must grant the application if it is satisfied that it is not contrary to the public interest to do so; and considers that it is appropriate to terminate the agreement taking into account all the circumstances, including the views of the employer (the applicant) the employee organisation covered by the agreement (the respondent); and the circumstances of the applicant and the respondent, including the likely effect that the termination will have on each of them.
[13] Referring to the terms of s.226(a) the Full Bench in Aurizon cited a passage from a decision of a Full Bench of the Australian Industrial Relations Commission in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 which was concerned with a corresponding, albeit not identical, provision of the Workplace Relations Act 1996:
‘The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards. An example of something in the last category may be a case in which there was no applicable award and the termination of the agreement would lead to an absence of award coverage for the employees. While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties. And although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them.’ 7
[14] The object of the FW Act is set out in s.3:
‘3 Object of this Act
The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:
(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and
(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and
(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and
(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and
(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and
(f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and
(g) acknowledging the special circumstances of small and medium-sized businesses.’
[15] The object of that part of the FW Act that deals with enterprise agreements is set out in s. 171:
‘171 Objects of this Part
The objects of this Part are:
(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and
(b) to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through:
(i) making bargaining orders; and
(ii) dealing with disputes where the bargaining representatives request assistance; and
(iii) ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.’
[16] The Federal Court, in CEPU v Aurizon, noted in reference to the objects set out in ss. 3 and 171 that:
‘While the Commission would undoubtedly be required to exercise any otherwise unconfined discretion in a way that was not antagonistic to these objects, it must be remembered that the primary means by which the legislature sought to achieve them was to enact the detailed provisions of the FW Act itself. It will be the section, or group of sections, that applies directly that will most usefully indicate what it was that the legislature was seeking to achieve in a particular situation.’ 8
[17] In discussing s.226(b) the Full Bench in Aurizon said:
‘All of the circumstances also need to be taken into account in considering whether termination of the agreement is appropriate … The requirement in s.226 (b) to take into account all of the circumstances including those set out in s.226 (b) (i) and (ii) is a requirement to take the matters into account and to give them due weight in assessing whether it is appropriate to terminate an enterprise agreement.’ 9
The evidence
[18] The applicant was previously known as Gujarat NRE Minerals Limited. It changed its name to Wollongong Coal in 2014 following its purchase by Jindal Steel and Power (Mauritius) Limited, a wholly owned subsidiary of Jindal Steel and Power Limited (JSPL). JSPL is an international steel and power company listed on the Bombay Stock Exchange.
[19] The applicant has owned and operated Russell Vale and the Wongawilli Colliery (Wongawilli) from December 2004 and December 2007 respectively.
[20] Approximately 174 employees were covered by the 2011 agreement when it was made.
[21] According to Mr Sharma, the 2011 agreement was made when the price of coking coal was at or near its peak. The applicant reported a profit in the 2011 financial year which is the only time this has happened since 2004. 10
[22] Operating conditions were positive at the time the 2011 agreement was made. The applicant produced 409,209 tonnes of coking coal from Russell Vale and 1,142,597 tonnes from Wongawilli in the 2011 financial year. 11
[23] In 2011 the applicant was preparing to transition to longwall mining at Russell Vale from board and pillar mining. This was expected to allow a steady increase in production to three million tonnes per annum by 2015. 12
[24] According to Mr Sharma:
‘At the time that the 2011 Agreement was made in late 2011, the Company was investing heavily in plant, property and equipment due to the positive operating and financial circumstances and outlook. This investment was funded by increased debt, reinvestment of earnings and shareholder equity. The Company’s liabilities for bonds and loans increased significantly in this period.’ 13
[25] The period 2011 to 2015 saw a reduction in the price of coking coal. Market conditions in 2015, and continued uncertainty, led the applicant to implement restructures at Russell Vale leading ultimately to the suspension of operations and the placement of the colliery on a care and maintenance basis in September 2015. This involved making all production and engineering employees redundant. 14
[26] According to Mr Sharma, the applicant has not employed employees to perform work covered by the 2011 agreement since 17 September 2015, nor has the applicant engaged contractors to perform such work. The only employees at Russell Vale are involved in administration, statutory inspections and other compliance tasks. 15
[27] While Wongawilli was also placed on a care and maintenance basis in 2014 it was subsequently re-opened in 2016. The applicant currently uses a third party contractor, CAS Mining Services Pty Ltd (CAS), to supply the non-staff labour at Wongawilli. Wongawilli currently operates as a 24 hour, seven day a week board and pillar operation. 16
[28] The applicant is exploring ways in which it can recommence operations at Russell Vale. 17 This will necessitate approval of a new UEP by the State government.18 It is intended to seek a UEP based on board and pillar operation rather than longwall mining to reduce the potential groundwater, biodiversity, heritage and infrastructure effects and in order to avoid any prospect of subsidence.19 At the time of the hearing the applicant had not yet lodged its application for a new UEP.20 It can be expected to take at least six to nine months from date of submission to approval.21
[29] Even with an approved UEP operations could only be recommenced at Russell Vale after significant capital works. Mr Sharma estimated this would cost approximately $15 million and take about six months to complete. 22 There would also need to be further development work before mining could recommence. The applicant estimated that the earliest production could recommence at Russell Vale would be September 2019.23
[30] Mr Sharma said that because of the need to use the board and pillar method of mining, and the depth of the mine, the applicant would need to be able to operate Russell Vale ‘as efficiently and flexibly as possible, including close scrutiny of costs over the life of the mine’. 24
[31] Mr Sharma pointed to a number of features of the 2011 agreement which he said imposed restrictions and costs – primarily when compared to the modern award.
[32] In relation to costs he referred to:
• Wage rates above the award;
• The No 1 Colliery Bonus scheme which requires the applicant to pay a bonus based on the average bonus for the previous calendar year of the Southern District Coal Mines;
• An attendance incentive (based on how many days sick leave are taken);
• The payment of all overtime at double the ordinary rate of pay;
• A requirement to pay union members to attend a union meeting once per quarter;
• A requirement that contractors paid by the applicant be paid the same conditions as in the 2011 agreement (unless they have their own enterprise agreement recognised by the CFMEU). 25
[33] Mr Sharma also referred to other provisions of the 2011 agreement that he said imposed restrictions and inefficiencies:
• Restrictions on the use of fixed term employees;
• Restrictions on allowing employees to return to work with less than a 10 hour break between shifts;
• Personal leave in excess of the award provisions;
• Restrictions on the process to be followed in the case of retrenchments and additional retrenchment pay;
• Provisions requiring the applicant to give preference to previously retrenched workers when filling positions;
• Scope for the unilateral referral of disputes to arbitration and the wide scope of the dispute settlement procedure;
• Restrictions on the way in which poor attendance is managed. 26
[34] Mr Sharma said there had been no discussions with the respondent about what might happen if Russell Vale re-opened. When I asked him why not, he replied:
‘Basically, we are right now focussing on making this company viable again to start operate (sic) and we are actually not sure when and how this Russell Vale will be becoming operating (sic).
Right. I understand that but clearly you’ve turned your mind to the issue that if the mine does re-open, you’ve turned your mind to what kind of pay and conditions might theoretically apply because that’s why we’re here…so I’m just wondering why you wouldn’t have thought that it might have been useful to have discussions?---As I said, like it’s a bit premature to worry about that but, of course, we are looking at this – this company had some rough past and we are trying to get on with the legacy issues and making sure that the company can start afresh, a viable and a good operating company in future, so that’s why we think that it’s a bit premature to start conversation about negotiating with union for the pay rates and all at this stage.’ 27
[35] Mr Sharma said in his cross-examination that the applicant was confident that mining would resume at Russell Vale though he accepted there was some degree of uncertainty about the approval of the revised UEP. 28
[36] Mr Sharma agreed with Mr Walkaden that in the last financial year (the 12 months to 31 March 2018) the applicant had made ‘a massive loss’ of $73 million. 29
[37] Mr Sharma said the applicant had not looked at whether it would employ labour directly or would utilise outsourcing when operations at Russell Vale were resumed. 30
[38] Mr Sharma agreed with Mr Walkaden that the applicant would look to resume operations with a lower pay rate and that terminating the 2011 agreement was a crucial step in achieving that outcome. 31
[39] Mr Sharma said that he could not quantify the cost savings that would be made if his complaints about the 2011 agreement were addressed under terms suitable to the applicant. 32 He also agreed that he could not say that the termination of the 2011 agreement would make a material difference to the applicant’s performance.33
[40] Mr Sharma agreed with Mr Walkaden that the applicant did not have a very good record of meeting its financial obligations. 34
[41] In his statement Mr Colley said that the price of coking coal had recovered since mid-2016, and that:
‘With very few exceptions, almost all companies operating coal mines in Australia are making very healthy profits from their Australian operations.’ 35
[42] Mr Conkey said in his statement that he was employed by the applicant from August 2012 until he was made redundant in September 2015. 36 He said that he and most of his former workmates previously employed by the applicant are earning less than they earned while working for the applicant. He said he would like to be offered his job back with the applicant, though he said a significant number of his former workmates would not accept any such offer.37
[43] Mr Timbs said he had been involved in the negotiations for the 2011 agreement. 38 He said that of the various provisions complained of by Mr Sharma, only two had been the subject of any significant discussion: the hourly rate and the bonus.
‘The complaints that Mr Sharma now makes about the other provisions were not made by Wollongong Coal during the negotiations. It was Wollongong Coal that proposed the inclusion of the attendance incentive payment.’ 39
[44] Mr Timbs said that he was unaware of any coal mine worker that is paid the award rate of pay. 40
[45] Mr Timbs said that the wage rates in the 2011 agreement are lower than the wage rates paid by all other coal mining companies in the Southern District. For example, a Level 4 – Experienced Mineworker would be paid $37.93 per hour under the 2011 agreement. This compares to $41.24 at the Appin Mine (for the equivalent classification), $38.52 or $39.44 at the Tahmoor Mine, and $38.26 or $39.73 at the Metropolitan Mine. He said that it was difficult to do a precise comparison with the Dendrobium Mine as employees there were on an annualised salary but mineworkers at Dendrobium performing the same work and working to the same roster would earn more than under the 2011 agreement. 41
[46] Mr Timbs said he understood that CAS employees working at Wongawilli are paid $34 an hour which he notes is about 33.9% above the award rate of pay. 42
[47] Mr Timbs said the bonuses paid at the Appin Mine and the Metropolitan Mine are higher than the bonus applicable under the 2011 agreement (which would amount to $454.29). He said he understood that the employees at Wongawilli are paid a weekly bonus of $400. 43
[48] In relation to the payment of overtime Mr Timbs described how other coal mines in the Southern District pay overtime. At Dendrobium and Metropolitan all overtime is paid at double time. At Appin rostered overtime and non-rostered overtime for weekend-roster employees are paid at double time, while non-rostered overtime for weekday rostered employees worked Monday to Saturday is paid at 150% for the first three hours and otherwise at double time. 44 Mr Timbs said he understood that all overtime worked at Wongawilli was paid at double time.45
[49] Mr Timbs noted that employees were paid to attend union meetings at Appin and Metropolitan Mines. 46
[50] Mr Timbs said that the enterprise agreements that apply to the Appin, Dendrobium and Metropolitan Mines contain provisions that impose limitations on the engagement of contractors. Unlike the 2001 agreement the agreements that apply at the Appin and Dendrobium Mines require the employer to terminate the services of contractors performing production and engineering work prior to making any employees forcibly redundant. 47
[51] Mr Timbs said the enterprise agreements that apply at the Appin and Tahmoor Mines contain similar restrictions about hours of work to those complained about by Mr Sharma. 48
[52] In relation to Mr Sharma’s comments about fixed term employment Mr Timbs said the use of fixed term employment was rare – and that the Appin and Metropolitan agreements were even more restrictive in their provisions on this matter than the 2011 agreement. 49
[53] Mr Timbs denied that the provisions in the 2011 agreement about 10 hour breaks were unusual or unreasonable. 50
[54] Mr Timbs said the process that the enterprise agreements applying to the other coal mining companies in the Southern District require the employer to follow prior to any forced redundancies are similar, if not more restrictive, than those in the 2011 agreement. 51 He also notes that the quantum of redundancy pay in the 2011 agreement is identical to the quantum of redundancy pay applicable at the Appin, Metropolitan and Tahmoor Mines. Dendrobium is slightly more generous.52
[55] Mr Timbs says that the capacity to refer disputes to arbitration unilaterally and the scope of the dispute settlement procedure is similar to some of the other agreements operating in the Southern District. 53
[56] Mr Timbs also referred to a number of other provisions in the enterprise agreements that apply to the other coal mining companies in the Southern District that are either more beneficial or more restrictive than the equivalent provisions in the 2011 agreement. 54
[57] Mr Timbs agreed with Mr Brotherson that the other mines in the Southern District he had been referring to operate using longwall (rather than board and pillar) mining. 55
[58] Mr Timbs agreed that the hourly wage rate in the Clarence Mine enterprise agreement (where a board and pillar operation is utilised) is currently $33.99, substantially under the rate under the 2011 agreement (though he added that the employees receive a larger bonus). 56 He said he had not referred to this agreement as it was not in the same district.57 Rather it was one of the ‘western mines’, that is, on the other side of the Blue Mountains.58
[59] Mr Timbs said that the respondent did not agree with Mr Sharma’s assertion that the applicant has only employed staff at Russell Vale performing administrative, statutory inspections and other compliance tasks. He said that since September 2015 the applicant have had staff employees performing work that had previously been done by employees that were covered by the 2011 agreement, this work included ongoing remedial work (such as roof bolting) and inspections of vehicles and machinery that had previously been done by fitters and electricians. 59
Consideration
[60] I am satisfied that the 2011 agreement is a fairly typical enterprise agreement for coal mines operating in the Southern District. While it provides for reasonably generous pay and conditions, and includes a number of restrictions on managerial prerogative, these are not out of line with what applies to the other mines in the same area of New South Wales. While the agreement is well past its nominal expiry date it is not obviously ‘out of date’.
[61] Having said that, the applicant – if it is to reopen Russell Vale on an economically sustainable basis - clearly faces a number of challenges not faced by other mines in the district, including the use of the board and pillar operating procedure and the depth of the mine itself. These certainly place additional pressure on the applicant to operate as cost effectively as possible.
[62] One of the relatively unusual features of this application is that there are no employees who would be directly affected by the termination of the agreement. Nevertheless the applicant clearly hopes to re-open the mine and as things stand any production and engineering employees employed by the applicant would be covered by the agreement. It also possible (though not beyond doubt), that the agreement would have some application even if the mine were to be reopened using outsourced labour (in the same way as Wongawilli is currently operating).
[63] It may well be that there are provisions in the agreement that would make it more difficult to operate the mine on a sustainable basis. What causes me particular disquiet however is that the applicant has made no effort to try and negotiate with the respondent about its concerns with the 2011 agreement. I accept that in the absence of any currently engaged employees it would not be possible to finalise an agreement under the FW Act. That does not mean however that negotiations could not take place between the parties as to what form a new – and possibly more appropriate – agreement could take.
[64] In my view it would be premature to terminate the agreement until there has at least been a genuine effort by the applicant to try and resolve its concerns by negotiation. I am satisfied that it would be contrary to the public interest to terminate the 2011 agreement before any such effort has been made. In particular it would be inconsistent with the object of the FW Act – especially the emphasis on enterprise-level collective bargaining.
Conclusion
[65] The application to terminate the 2011 agreement is dismissed on the basis that I am satisfied that terminating the agreement would be contrary to the public interest.
SENIOR DEPUTY PRESIDENT
Appearances:
K Brotherson, of counsel, for the applicant.
A Walkaden, National Legal Officer, for the respondent.
Hearing details:
2018.
Sydney:
10 October.
Printed by authority of the Commonwealth Government Printer
<AE889393 PR703844>
1 Exhibits 1 and 2
2 Exhibit 4
3 Exhibit 5
4 Exhibit 6
5 [2011] FWAA 7803
6 Aurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd [2015] FWCFB 540 at [126]
7 (2005) 139 IR 34
8 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126 at [23]
9 At [167]
10 Exhibit 1 at [22]
11 Exhibit 1 at [23]
12 Exhibit 1 at [26]
13 Exhibit 1 at [27]
14 Exhibit 1 at [31] – [34]
15 Exhibit 1 at [35] – [36]
16 Exhibit 1 at [38] – [40]
17 Exhibit 1 at [49]
18 Exhibit 1 at [50]
19 Exhibit 1 at [52]
20 PN116
21 Exhibit 1 at [65]
22 Exhibit 1 at [67] - [69]
23 Exhibit 1 at [72]
24 Exhibit 1 at [77]
25 Exhibit 1 at [80] – [88]
26 Exhibit 1 at [96]
27 PN 105-107
28 PN110-126
29 PN235-242
30 PN367
31 PN386-7
32 PN534-5
33 PN536
34 PN778
35 Exhibit 5 at [11]
36 Exhibit 4 at [1] – [2]
37 Exhibit 4 at [11] – [15]
38 Exhibit 6 at [9]
39 Exhibit 6 at [14]
40 Exhibit 6 at [19]
41 Exhibit 6 at [20] – [21]
42 Exhibit 6 at [22]
43 Exhibit 6 at [26]
44 Exhibit 6 at [30]
45 Exhibit 6 at [31]
46 Exhibit 6 at [33] – [34]
47 Exhibit 6 at [37]
48 Exhibit 6 at [38]
49 Exhibit 6 at [43] – [45]
50 Exhibit 6 at [46] –[50]
51 Exhibit 6 at [56]
52 Exhibit 6 at [57]
53 Exhibit 6 at [59] – [60]
54 Exhibit 6 at [61]
55 PN985
56 PN1002-3
57 PN999
58 PN1212
59 Exhibit 6 at [75]
6
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