Goldsmith v Carter
[2012] NZHC 1693
•3 August 2012
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CIV-2012-470-000067 [2012] NZHC 1693
BETWEEN E J GOLDSMITH AND OTHERS AS TRUSTEES OF THE G & T FAMILY TRUST
Appellants
AND IAN KENNETH CARTER, HTT 2003
LIMITED AND KPMG FINANCIAL SERVICES LIMITED AS TRUSTEES OF THE RIVERGLEN FAMILY TRUST
First Respondents
ANDIAN K CARTER LIMITED Second Respondent
ANDIAN KENNETH CARTER Third Respondent
Hearing: 10 July 2012
Counsel: P Wright for Appellants
M McKechnie for Respondents
Judgment: 3 August 2012
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Friday, 3 August 2012 at 4:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Burton & Co., Auckland
McKechnie Quirke & Lewis, Rotorua
Copy to:
P Wright, AucklandM S McKechnie, Rotorua
GOLDSMITH & ORS V CARTER & ORS HC ROT CIV-2012-470-000067 [3 August 2012]
Introduction
[1] On 30 August 2004, the first respondents, the trustees of the Riverglen Family Trust, entered into an agreement with Edward Goldsmith or nominee for sale to Mr Goldsmith of an undivided half share in a property situated at 707 Pukehina Parade, Pukehina, in the Eastern Bay of Plenty, on the basis that the vendor and purchaser would join together in the construction of two apartments on the land. The agreement provided that the vendor would cause the second respondent, Ian K Carter Limited, to arrange the construction of the purchaser’s apartment in a good and workmanlike manner and in accordance with the plans and specifications attached to the agreement. The architect, Mr Carter, is one of the trustees of the Riverglen Family Trust and is also the third respondent in his personal capacity.
[2] The agreement also provided that the price of the land was $580,000 and the construction cost of the purchaser’s apartment was $516,000, to be paid by the purchaser to Ian K Carter Limited by way of specified progress payments. Mr Goldsmith subsequently nominated the appellants, the trustees of the G & T Family Trust, as the purchaser under the agreement. Mr Goldsmith is one of the trustees.
[3] The construction of the apartments should have been completed by about
1 June 2005. They remain unfinished and without a code compliance certificate. In substantive proceedings currently before the Tauranga District Court, the appellants seek specific performance of that part of the agreement relating to construction of the apartments. The proceedings have already been the subject of an interim decision by District Court Judge Maze on 11 February 2010, and an appeal decided by Cooper J on 21 December 2010.
[4] Cooper J allowed the appeal and referred the question of whether there had been a variation of the agreement back to the District Court. The appellants subsequently sought the admission of various letters between the parties’ solicitors which they said were relevant to the question of whether there had been a variation of the agreement.
[5] Following Cooper J’s decision, and what is acknowledged as a lengthy delay arising out of further discovery issues, the matter came on for final hearing before Judge Maze on 8 December 2011. Mr Goldsmith appeared for himself and the other trustees of the G & T Family Trust. The respondents were represented by Mr McKechnie.
[6] In a series of decisions on 8 December 2011, the Judge held that the further documents would not be admitted into evidence and ultimately that there had been no variation of the agreement. The case is still to be formally resolved as the District Court considered that before it could make a final decision on remedies it would require a further report from experts to be appointed by the Court. The appellants appeal against the decision of the Judge in respect of the admission of the further documents and her finding that there had been no variation of the agreement as well as what are said to be findings of fact in a subsequent memorandum of 29 May 2012. The experts’ reports have been received in the meantime.
[7] I am grateful to both counsel for their comprehensive submissions. I am conscious that the proceedings have a long and convoluted history and that as yet no substantive judgment has been given in the District Court. Accordingly, my judgment will be relatively short to enable the District Court proceedings to be concluded as a matter of priority. I will therefore not refer to every submission made or authority cited as I consider it more important to issue a judgment promptly.
Previous judgments
District Court decision – 11 February 2010
[8] Following an initial five day hearing in the District Court, Judge Maze issued an interim judgment on 11 February 2010 in which she ordered both the appellants and the first respondents to do such acts and to take such steps as were necessary to complete the building of the apartments and the exterior of the building. Upon completion of the work and issue of a code compliance certificate there was to be a taking of accounts between the appellants and the first respondents. These orders
were made on the basis of findings that the agreement between the parties was a joint venture with mutual obligations of good faith. The Judge stated that:
[27]...The development agreement was a joint venture; the failure to build a habitable building was due to [the builder’s] failure and negligence, and as such the cost must be born[e] between the joint venture parties.
The cost of that work was, in the first instance, to be met by the appellants because of what the Judge described as an imbalance in the position of the parties. The Judge found that the appellants had the resources to withstand the ill-fortune of the failure of the builder whereas the first respondents did not.
High Court Appeal decision – 21 December 2010
[9] The orders made in the initial District Court decision were overturned on appeal. In his judgment dated 21 December 2010, Cooper J accepted that the relationship between the parties could be characterised as a joint venture but did not consider that it could properly be described as essentially fiduciary in nature. He stated:
[38] ...While the parties had entered into a commercial contract which required co-operation, it could not be said that the nature of their relationship was one which obliged either to put the interests of the other first or meet any other kind of fiduciary obligation arising out of the relationship itself. I consider that it would only be if there were a general fiduciary relationship that G and T could have had the positive kind of duty, which the Judge held existed, to act to protect Riverglen in the circumstances that arose, and share any loss resulting from the builder’s failure to perform.
[10] Cooper J found that it was the first respondents and not the parties jointly who assumed the risk of the failure of the builder. He stated:
[45] For the various reasons I have addressed I do not consider that the Judge was right to hold that G and T must supply additional resources to achieve the joint objective (if necessary, realising assets to do so), meet the costs of carrying out the works pending a taking of accounts, or share in losses that might arise from completion of apartment A. I consider that G and T’s contract with Riverglen entitled it to acquire apartment A at a cost of
$516,000 (including GST), and, as between Riverglen and G and T, Riverglen assumed the risk of the failure of the builder to perform by virtue
of clause 16.0(a) and (b).
[11] The relief sought by the appellants included the possibility of an order requiring specific performance of the agreement and/or a variation of the agreement so as to complete the building. Mr Wright, for the appellants, referred to the Judge’s finding at [26] of her interim judgment dated 11 February 2010, that there had been agreement that the appellants would finish the interior of apartment A, while the first respondents finished the exterior of the building with a financial adjustment, if required, after that had occurred.
[12] Before Cooper J, counsel for the first respondents submitted there had never been an effective variation of the contract in terms set out in [26] of Judge Maze’s judgment. He submitted that the judgment properly construed was that there had not been an agreed variation; one had been discussed but was never put into effect. Cooper J said he was in some difficulty and was not in a position to decide whether or not there was an agreed variation as the one letter to which he was referred, that of
29 August 2006, referred to letters and faxes that had been exchanged between the parties on 25 and 28 August 2006, which were not part of the bundle of documents. It is also not clear to him whether or not specific performance (whether of the original or the varied agreement) would be a practical remedy.
[13] Cooper J concluded:
[51] I should record that I am not persuaded that the Judge was incorrect in her conclusion that the $70,000 payment that had been made was progress payment (d) under the agreement. It appears that the payment was made ahead of time, in terms of the agreement, but as the Judge noted, the payment meant that G and T had paid a total of $320,000 for work which was valued at $344,667. The fact that it is a progress payment, however, is not decisive on the variation issue, because the exchange of promises about what each party was going to do might have been sufficient consideration for the variation to be effective.
[52] However, having regard to what I have said in relation to specific performance, I consider the appropriate course to follow is to refer the matter back to the District Court for further consideration in the light of this judgment. That is essentially the second alternative form of relief sought in the notice of appeal. I would not, however, exclude specific performance from the remedies that the District Court is able to consider.
[14] When the matter came before Judge Maze once again on 8 December 2011, she issued two minutes and two rulings. In Ruling No. 1, the Judge noted that at [23] - [26] of her earlier judgment, she had specifically directed herself to the
question of whether or not there had been a variation of the original agreement between the parties. She had concluded that a $70,000 payment made on 30 August
2006 was, in fact, a progress payment under the original contract and, as no other benefit was claimed as consideration for the variation, there was no variation. The Judge was of the opinion that the $70,000 payment could not have been both a progress payment under the original agreement and consideration for a variation (which entailed a major change to the original agreement). Judge Maze stated:
[12] ...Given the way in which the plaintiffs presented their case and my clear finding of fact on the one issue which was advanced as evidence of a variation having being concluded, it is implicit in the decision that there was no variation.
[15] Judge Maze stated that the difference between the High Court and the District Court judgments appeared to be that Cooper J did not seem to perceive that the one and only argument advanced for a variation had been dealt with and rejected. The Judge was therefore of the opinion that the point was res judicata and the law just did not permit her to go back over decisions and make them again except in rare circumstances. The Judge concluded:
[17] Finally, I can only make a decision at any time on the basis of the evidence which is presented to me. With the greatest of respect to the learned High Court Judge, there was no evidence given to me, to permit me to conclude there had been an exchange of promises for the purposes of variation being an effective and enforceable agreement.
[16] The Judge also refused to admit the further documents largely it seems, on two grounds. The first was that the matter was res judicata and the second that the documents were, in any event, subject to a without prejudice privilege.
[17] Subsequently the Judge issued a memorandum on 29 May 2012 in which she stated, by way of some introductory remarks, that the parties could not agree on variations to the specifications, that delays were caused by the builder (not one of the parties) and that the dispute had reached the level where the appellants refused to permit the first respondents entry to Unit 1, which remains to this day unfinished. The memorandum also records the decision of the Judge not to proceed to judgment while this appeal is outstanding.
Admission of documents
[18] Cooper J referred the issue of variation back to the District Court because he had not been referred to the full exchange of correspondence between the parties on the issue of variation (see [12] above).
[19] After the matter returned to the District Court following the appeal the appellants filed a memorandum dated 31 October 2011 in the District Court proceedings in which they requested that the documents annexed to the memorandum, which included the letters exchanged between the parties on 25 and
28 August 2006, be accepted into evidence on the same basis as if they had been included in the bundle of documents. The appellants submitted that the District Court needed the documents to be fully informed of and have the terms of the variation before it in order to deal with any issues as may arise.
[20] By minute dated 1 November 2011, the Judge directed Mr McKechnie, on behalf of the respondents, to file and serve his submissions for the hearing on
8 December 2011 by 17 November 2011. Mr McKechnie was specifically directed to address the application for admission of the documents if it was opposed. Mr McKechnie did not however address the issue of the admission of the documents in his submissions dated 17 November 2011. The appellants state that they were therefore taken by surprise on 8 December 2011 when the admission of the documents was opposed.
[21] As noted in [16] the Judge refused to admit the further documents giving reasons in her ruling on 8 December 2011.
[22] With the greatest of respect to the Judge, I have reached the clear view that the documents annexed to the appellants’ memorandum dated 31 October 2011 should be admitted in evidence. Firstly, the issue whether or not there was a variation of the agreement is not res judicata. Cooper J directed the District Court to reconsider the question of consideration for the variation and the existence of the variation itself. Hence, the appellants were not unsuccessful on appeal. The issue of a variation was therefore not res judicata. It had not been finally determined.
[23] Secondly, I grant leave under s 98 of the Evidence Act 2006. Section 98(1)
and (2) provide:
98 Further evidence after closure of case
(1) In any proceeding, a party may not offer further evidence after closing that party's case, except with the permission of the Judge.
(2) In a civil proceeding, the Judge may not grant permission under subsection (1) if any unfairness caused to any other party by the granting of permission cannot be remedied by an adjournment or an award of costs, or both.
[24] I am unable to ascertain any unfairness in the admission of the documents. I agree with counsel for the appellants that admission of the evidence is clearly within the purposes and principles outlined in ss 6 – 8 of the Act. The documents clearly have a tendency to prove or disprove a matter of consequence to the determination of the proceeding as the judgment of Cooper J makes clear that the issue of the alleged variation of the agreement remains unresolved. I am of the view that the admission of the documents assists with its determination. The respondents were parties to the letters now sought to be admitted and were aware of their existence. There will also not be any delay to the proceedings caused by the admission of the documents. There is also no challenge to the authenticity of the documents nor any suggestion that anything would be gained by having them considered in an oral hearing.
[25] Thirdly, the documents are not privileged in terms of s 57 of the Evidence
Act. Section 57 provides:
57 Privilege for settlement negotiations or mediation
(1) A person who is a party to, or a mediator in, a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of any communication between that person and any other person who is a party to the dispute if the communication—
...
(3) This section does not apply to—
(a) the terms of an agreement settling the dispute; or
(b) evidence necessary to prove the existence of such an agreement in a proceeding in which the conclusion of such an agreement is in issue; or
...
[26] I am of the view that s 57(3)(b) applies in this case, in that the documents are necessary to prove the existence of an agreement in this proceeding in which the conclusion of such an agreement is in issue. I note that the document which concluded the chain of correspondence, being the letter from the appellants’ solicitors, Cooney Lees Morgan, to the respondents’ solicitors, Harris Tate & Co, dated 29 August 2006, is also headed “Without prejudice save as to costs”. It is already in evidence despite its “without prejudice” tag. I accept that this letter is a “book end” to the negotiations conducted between the parties’ solicitors. The other “book end” is the letter from Cooney Lees Morgan to Harris Tate & Co dated 17
August 2006, in which the appellants purport to cancel the agreement. With these two documents already in evidence, it makes sense to admit the evidence of the negotiations which took place between these two dates to provide more coherent evidence on the issue of a variation.
Variation
[27] I now turn to the issue of variation, taking into account the full exchange of correspondence between the parties and their solicitors. The evidence for the variation is as follows:
(a) On 31 July 2006, Mr Carter wrote to Mr Goldsmith setting out a calculation of deductions that could be made from the purchase price if the appellants proceeded with the fit out of their apartment themselves.
(b)On 1 August 2006, Mr Carter wrote to Mr Goldsmith asking him to hold off making the $70,000 progress payment until Mr Carter had approved all the stopping to the apartment.
(c) On 4 August 2006, Mr Carter wrote to Mr Goldsmith advising him that the stoppers had not yet finished stopping the apartment.
(d)On 17 August 2006, Cooney Lees Morgan wrote to Harris Tate rejecting the offer of a credit if the appellants proceeded with the fit out of their apartment themselves and also cancelling the construction contract with the first respondents.
(e) On 22 August 2006, Mr Carter wrote to Mr Goldsmith advising him that he had told the builder that he could not make the $70,000 progress payment until the stopping was complete.
(f) Subsequent correspondence discloses that a meeting was held between the parties on 24 August 2006 at which the appellants agreed to reconsider their position.
(g)On 24 August 2006, Mr Carter wrote to Mr Goldsmith advising him of the payments that were due before he could take possession of his apartment.
(h)On 25 August 2006, Harris Tate wrote to the builder stating that the appellants were ready, willing and able to pay the outstanding amount as soon as it was confirmed that the work was actually completed.
(i)Also on 25 August 2006, Cooney Lees Morgan wrote to Harris Tate making the following offer:
(i)The appellants would pay the second respondent $70,000 for progress payment (d).
(ii) The construction contract would stay on foot.
(iii)The appellants would reserve all their rights in relation to the remedial costs of the work completed and damages.
(iv)The offer was subject to the builder vacating the appellants’ apartment by 8:00 am Monday, 28 August 2006 so as to enable the appellants to complete the work on the interior of their apartment. The builder would complete expeditiously all its work on the exterior of the apartments under its contract with Harris Tate’s client.
(j)Later that day, on 25 August 2006, Harris Tate replied stating that the proposal set out in the letter from Cooney Lees Morgan was accepted subject to:
(i) Payment of $70,000 by 4:00 pm on 30 August 2006;
(ii)An acknowledgement by the appellants that the statements set out in the letter of 24 August 2006 (as revised on 25 August
2006) was the basis upon which discussion of the outstanding balance was to be negotiated.
(k)Later still, on 25 August 2006, Cooney Lees Morgan wrote to Harris Tate stating that the appellants did not accept the respondents’ statements regarding outstanding balances and rejected that condition of Harris Tate’s proposal. Harris Tate were asked to respond and advise whether the respondents would withdraw this condition.
(l)Finally, on 25 August 2006, Harris Tate advised Cooney Lees Morgan that the condition was withdrawn but without prejudice to their clients’ right to assert it at a later date.
(m)On 28 August 2006, Cooney Lees Morgan acknowledged receipt of the 25 August letter from Harris Tate and recorded that the appellants accepted the condition that the $70,000 payment be made by 4:00 pm on Wednesday, 30 August 2006.
(n)On 29 August 2006, Cooney Lees Morgan wrote to Harris Tate as follows:
1.We refer to our letters and your faxes dated 25 August and yesterday.
2. Our client’s position is set out in our first letter dated 25
August. Your client accepted the terms contained in that letter later that day, subject to a condition that the $70,000
payment be made by 4:00 pm tomorrow. We accepted that
condition yesterday.
3. The position is therefore that:
(a) Our client will pay your client, Ian K Carter Limited,
$70,000 (including GST) by 4:00 pm tomorrow.
(b) Our client’s construction contract with one or other of your client’s entities stays on foot. The issue as to which entity this contract is with (or even as to whether one of your client’s entities is acting as our agent) will be left for later determination.
(c) Our client reserves all of its rights in relation to:
(i) Remedial costs of work completed (including work relating to this progress payment); and
(ii) Damages, including (but not limited to) those damages relating to any extra costs to finish above the contract price of $516,000 (including GST) and damages relating to consequential losses from delay.
(d) This agreement requires that Alfa Homes Limited
(“Alfa”) (and any of its sub-contractors):
(i) vacated our client’s apartment by 8:00 am Monday, 28 August 2006 so as to enable our client to complete the work on the interior of his apartment; and
(i) complete expeditiously its work on the exterior of the apartments (under its contract with your client).
4.It seems from your fax dated yesterday that you are continuing to assert that your client is acting as our client’s agent. We repeat that this is an issue that will need to be determined at the same time as our cost disputes.
5. Our position is that our client does not have a contract with
Alfa that requires it to respond to Alfa’s Variation Order A47
or anything else. One of your client’s entities (Riverglen Trust) has the contract with Alfa (and we understand that Alfa accepts this position because it will no longer communicate with our client at all).
6.It follows that the terms of your client’s contract with Alfa are its business. Accordingly, our clients will not “addressing” the figures contained in your client’s “payment schedule”. Beyond the further payment of $70,000, the amount our client is to pay (if any) under its contract with your client will be ascertained at a later date. By the terms of our agreement, we have simply reserved all cost disputes for future determination.
[28] The parties’ subsequent conduct shows their intention to be bound by the variation. There are numerous examples. Some of them are as follows:
(a) On 7 September 2006, Mr Carter wrote to the builder itemising the work needed to complete the building.
(b)On 27 September 2006, Cooney Lees Morgan wrote to Harris Tate noting that the builder did not appear to be completing the exterior work. Cooney Lees Morgan reminded Harris Tate of the variation agreement and asked for advice as to the date on which the respondents expected the exterior work to be completed.
(c) Also on 27 September 2006, Alfa, the builder, wrote to Harris Tate stating that they would not be fixing the stairs in Mr Goldsmith’s apartment or doing any work in there as they had been excluded from dealing with the apartment and it was no longer their job.
(d) On 4 October 2006, Mr Carter wrote to Mr Goldsmith as follows:
The only part of the contract which you are taking care of is the internal fit out of your apartment which does not include the repair of defects in the exterior wall such as the aluminium joinery which will be taken care of by Riverglen in accordance with the defects list prepared by Ian K Carter Limited and your “expert consultants” list.
(e) In an architect’s report dated 8 October 2006, it is noted that the owner of Apartment A took over the contract to complete interior only of Apartment A on 28 August 2006.
(f) On 16 October 2006, Ian Carter wrote to Alfa noting the termination of the construction contract between the first respondents and the builder and stating:
Ian I Carter Limited has been instructed by the owners to complete the contract except for the interior of Apartment A which is being completed by Eddie Goldsmith. The quantum issues will be determined later when unfinished and remedial work is completed.
(g)On 19 October 2006, Cooney Lees Morgan wrote to Harris Tate noting their client’s advice that Mr Carter had now taken steps towards completing the exterior work. Cooney Lees Morgan requested the provision of a full schedule of works to complete for the exterior and advice as to who Mr Carter would be contracting with to complete this work.
(h)On 20 October 2006, Mr Carter wrote to Mr Goldsmith listing the tradesmen who had entered into arrangements with him to finish the work.
[29] Having reviewed the evidence relating both to the negotiations leading to the letter of 29 August 2006 and the subsequent conduct of the parties, I am of the view, again with the greatest of respect to the Judge, that there was a variation of the agreement concluded on 29 August 2006 in the following terms:
(a) The agreement remained on foot, i.e., the notice of cancellation in the
Cooney Lees Morgan letter dated 17 August 2006 was withdrawn.
(b)The $70,000 progress payment, which was not at that time yet due, would be paid.
(c) The builder would vacate the appellants’ apartment and the appellants would complete the interior of their apartment.
(d)The first respondent would ensure that the builder finished the exterior of the apartments.
(e) Issues as to payments and damages would be reserved.
[30] It was also an implicit part of the variation that if the builder did not finish the exterior of the apartments then the first respondent would arrange for someone else to do so. I agree with Cooper J that the proper construction of the agreement is that the first respondent assumed the risk of the failure of the builder to perform.
[31] As to the issue of consideration for such a variation, it is my view, firstly, that the fact that the $70,000 payment was scheduled to be made as a progress payment does not mean that it cannot also be evidence of and consideration for a variation of the agreement. The Judge acknowledged that it was not yet due for payment because the stopping was not yet completed. The progress payment was only due to be paid when the dwelling was “fully lined”. Early payment was, in my view, therefore sufficient consideration for the variation.
[32] The appellants had also cancelled the agreement by letter dated 17 August
2006 and so reinstatement of the progress payment was, in itself, consideration for the variation, leaving aside any question of its timing.
[33] Secondly, there was a mutual exchange of promises which required both parties to change their position, namely, that the appellants would complete the interior of the apartment while the first respondents would ensure that the builder finished the exterior of the apartments. It was also recognised that this would alter the financial position of the parties so that issues as to payments and damages would be reserved. That mutual exchange of promises is also sufficient consideration for the variation.
[34] In any event, I am of the view that consideration is not necessarily essential for the variation to be effective. As noted by the Court of Appeal in Antons Trawling Co Ltd v Smith:[1]
[1] Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23 (CA)
[93]...The importance of consideration is as a valuable signal that the parties intend to be bound by their agreement, rather than an end in itself. Where the parties who have already made such intention clear by entering legal relations have acted upon an agreement to a variation, in the absence of policy reasons to the contrary they should be bound by their agreement.
Minute of 29 May 2012
[35] The appellants also appeal against, what are said to be findings of fact in the minute of 29 May 2012 by the Judge. Paragraph (1) states:
...The parties could not agree on variations to the specifications and delays were caused by the builder (not one of the parties) and the dispute reached the level where the plaintiffs refused to permit the defendants entry to Unit 1 which remains to this day unfinished...
[36] The appellants appeal on the basis that there was no evidence to support these findings and/or that they were incorrect on the evidence.
[37] Having considered the matter carefully however, I am of the view that these comments by the Judge cannot be taken as findings of fact. The comments appear to me to be an introductory recital of some of the relevant background to the dispute. The three matters referred to are not directly at issue in the proceedings. They are not specifically pleaded.
[38] I have been taken through the evidence in relation to each of these matters. There is obviously room for argument about the proper interpretation of the evidence but I am of the opinion that it is unnecessary for me to make any findings on the evidence in the context of this interlocutory appeal.
[39] In summary, I accept that the comments made by the Judge are merely observations. Even if they were findings of fact, they are not in any way
determinative of the parties’ responsibilities.
Conclusion
[40] The appeal against Judge Maze’s ruling of 8 December 2011 is allowed. The documents annexed to the appellant’s memorandum dated 31 October 2011 are admitted in evidence. The finding of the Judge that there had been no variation is set aside and is replaced with a finding that there had been a variation of the agreement in terms set out in para [29] above. I also direct that the District Court should take the variation into account when dealing with subsequent issues to be determined in this proceeding. The appeal against the Judge’s minute of 29 May 2012 is dismissed on the basis that the comments are observations, which are not determinative of the parties’ responsibilities.
Costs
[41] Costs should follow the event. If counsel are unable to agree, I will receive memoranda.
……………………………….
Woolford J
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