CPD Holdings Pty Ltd t/as The Bathroom Exchange v John Baguley and Daniela Baguley

NCAT Consumer and Commercial|2014-06-11

Mr Peter Snelgrove for the builder, CPD Holdings Pty Ltd t/as The Bathroom Exchange (cross applicant / cross respondent) File Number(s): HB 13/20778 and HB 13/27768

APPLICATION 1These two applications have a somewhat protracted history which is worth reciting for a better understanding of the respective claims and to assist in formulating any costs application. 2I have throughout these reasons referred to the "builder" and the "home-owners" to avoid confusion with the use of the terms claimant/cross-claimant, etc. 3Application HB 13/20778, the builder's claim, was filed in the CTTT on 18 April 2013. The application sought orders for payment of the sum of $31,182.20 allegedly outstanding under a contract for performance of residential building work by the builder for the home-owners. 4It was not the first application filed by the builder in relation to this dispute. On 13 January 2013 the builder had filed his first application seeking orders for payment of $26,000.00. That application was withdrawn by the builder on 15 March 2013. 5On 8 February 2013 the builder filed a statement of claim in the Local Court seeking orders for payment by the home-owners of $10,205.17. That claim was transferred by order of the Local Court to the CTTT on 9 May 2013 and was withdrawn by the builder on 1 August 2013. 6The home-owners' claim (HB 13/27768) was filed in the CTTT on 23 May 2013 seeking orders for compensation for allegedly incomplete and defective work and for liquidated damages in the total sum of $21,219.35. 7Both matters came before me for hearing on 1 August 2013. The parties were unrepresented and underprepared. The matters were adjourned with comprehensive directions for exchange of documentary material and leave granted for the home-owners to file and serve an amended application. It was noted at that time that both parties agreed the contract remained on foot. Accordingly the parties were advised of the effect of the decision of the Court of Appeal in Brewarrina Shire Council v Beckhaus Civil Pty. Ltd. [2006] NSWCA 361 and it was suggested they may wish to seek legal advice as to the implications for their respective cases. 8The matters next came before me for directions on 19 September 2013 at which time it was noted the home-owners' claim was amended to seek orders for $96,813.30 plus costs. Leave was granted for legal representation, further directions were made and the matters were adjourned for a two day hearing on 9 and 10 December 2013. 9At that time the home-owners withdrew their reliance on the expert evidence of Mr Grieve, previously filed, and sought to rely on the evidence of Mr. Stanton, handed up at the hearing. 10The matters were again adjourned for the builder's expert to consider the Stanton report and the issue of costs was reserved. 11As the CTTT was abolished on 1 January 2014 the two matters proceeded before NCAT pursuant to the transitional provisions of the NCAT Act Schedule 1 and the relevant statutory provisions that were in place prior to 1 January 2014. 12At a directions hearing on 26 May 2014 the admissibility of reports filed by the builder on 8 May 2104 and by the home-owners on 15 May 2014 was clarified. Directions were also made for the parties' experts to conduct a joint flood test and to file a joint report on the outcome. 13It was also noted that the three experts now relied on by the parties were to meet on 10 June 2014 with a view to clarifying issues remaining in dispute and to identify the evidence relied on in that regard. 14The experts did meet on 10 June 2014 but were unable to file a joint report until the following morning. 15As a result of the meeting of the experts and as a result of certain concessions made throughout the hearing on 11 June 2104 it was possible before adjournment at the end of the day for the parties to reach full agreement on all issues necessary to fully dispose of the builder's claim. 16It was agreed that the builder was entitled to orders that the home-owners pay it the sum of $24,818.00. That amount was calculated as follows Contract price 54,848.00 Variations conceded by the home-owners 11,263.00 Variations for which agreement was reached 2,300.00 68,411.00 Less agreed negative variations 1,700.00 Adjusted contract price 66,711.00 Less the sum paid by the home-owners 41,893.00

Agreed amount owed by the home-owners 24,818.00

17It was further agreed by the parties' legal representatives that this sum should operate as a set off against any sum found to be owed by the builder on the home-owners' claim and that any order in regard to the amount should be stayed until the determination of HB 13/27768. 18Although an attempt had been made at an earlier hearing to commence the proceedings (some submissions had been made by the builder without the benefit of legal representation) it was agreed with the legal representatives that due to the elapse of time, the changes to the claims, the fragmentary nature of earlier submissions and paucity of evidence both matters should recommence on 10 June 2014.

JURISDICTION 19It was not disputed that the parties entered into a contract on or about 2 November 2012 for the performance by the builder for the applicants of home renovations for the agreed sum of $54,848.00. 20Accordingly I am satisfied the Tribunal has jurisdiction to hear and determine the claims pursuant to the HBA s 48K. THE EVIDENCE 21The home-owners gave relevant evidence to the following effect. 22The home-owners Points of Claim filed 12 August 2013 and subsequently amended sought orders for payment in the sum of $96,813.30 from the builder in respect of allegedly incomplete and defective work and for costs. 23The parties had entered into a contract for residential building work on or about 2 November 2012. The contract called for gutting and re-building of a bathroom and an en-suite, for construction of a non-structural wall and for installation of doors and fittings. The contract was for a lump sum of $54,848.20. Work commenced on or about 7 November 2012 and the contract called for completion of the work on or about 19 December 2012. 24The builder did not complete the contracted works during the six week construction period allowed by the contract, or at all. The contract period expired and the contract was terminated by the home-owners on 12 August 2013 following a failure by the builder to remedy a breach of which he was on notice. 25The home-owners sought orders for compensation in respect of allegedly defective work and the cost to complete incomplete work. 26The bathroom floors were said to be without adequate and proper fall and the only suitable method of rectification is to remove them and replace them. However, in doing so it is likely that the under-floor heating will be compromised. 27Mrs Baguley gave evidence on affirmation and was cross-examined on her evidence. During cross-examination Mrs Baguley agreed that the application was originally for $21,219.00 but was amended to about $93,000.00 and despite the abandonment of the Grieve report and the adoption of the Stanton report showing defects of $52,131.00, the amount claimed remained $93,000.00. The home-owner when asked to justify that claim then said the claim was in fact "fifty something thousand". 28A short adjournment was granted for Mr Birch to consult with Mr Baguley, after which it was clarified that the home-owners' current claim was for compensation in the total sum of $75,200.45. 29Mrs Baguley, in giving her evidence, was at times confused in her recollections and/or disingenuous and argumentative in her responses. Her responses at times were self-serving statements and Mrs Baguley was shown to be capable of being both rude and aggressive. However, in fairness to Mrs Baguley her depth of feeling in regard to the factual issues in dispute may well have resulted from the mutual antipathy between herself and Mr Morphett that had developed and appeared to remain intact. 30Under cross examination Mrs Baguley agreed that she had refused access to the builder at an on-site meeting on or about 27 December 2012. During the course of the hearing the meeting was referred to as the "kiss my arse meeting" in reference to the conversation in which Mrs Baguley had directed both Mr Morphett and Mr Groves to leave the site. 31Mrs Baguley agreed that she had sent an e-mail on 14 January 2013 in which the builder was denied further access and agreed she did not want Mr Morphett to return at any time to complete the work and had not responded to e-mails received from Mr Morphett asking to return to complete the works. Specifically an e-mail from Mr Morphett was received by Mrs Baguley on 1 February 2013 requesting further access to the site to which Mrs Baguley acknowledged she had not responded. 32Mrs Baguley acknowledged that she had received a letter from the builder suspending the works but had not taken it seriously and had not responded to it. 33On 29 April 2013 the owners had sent the builder a notice of breach and required the builder to complete the works. The builder's response to that notice, advising he was willing to complete was met with the issuance of a notice of termination on 12 August 2013. 34Mrs Baguley acknowledged that the contract did not provide for liquidated damages and that the claim for $250 per week in that regard was "just a figure" and that a claim for rubbish removal was no more than an estimate based on previous experience. 35The home-owners relied on some 71 filed documents (tendered and identified as exhibit 2) including the following: Expert report of Stanton Building Consultancy dated 4 December 2013. Supplementary Stanton expert report dated 15 May 2014. Statement of Daniela Baguley dated 13 January 2014 and (undated) chronology of events. Copy of the contract executed by the home-owners on 2 November 2012. Amended Scott schedule prepared by Stanton 17 December 2013. 36It was the builder's case that all of the work (with two very minor exceptions) was completed. Any outstanding work related to incomplete variations which had been requested by the home-owners. 37The builder had been unable to return to the site to complete the work because it had been denied access. The denial was treated by the builder as a repudiation of the contract by the home-owners which was accepted and the contract terminated. 38Mr Morphett gave evidence on affirmation and was cross-examined on his evidence. Mr Morphett was also unable to articulate his claim with any accuracy and in fact did not do so until well into the afternoon of the second day at which time the figure of $30,761.56 was identified as the sum in dispute. That difficulty, however, was over-taken by the agreement reached in regard to the builder's claim. 39Mr Morphett was also aggressive in his responses to questions, did not like to be contradicted but generally appeared to have a clearer recollection of past events than did Mrs Baguley. 40Mr Morphett agreed that the work was not completed within the contract period but claimed it was completed soon after and that his claim for an extension of time was made after the time had expired. He further agreed that invoices were issued before work was completed and that he was not entitled to issue an invoice for a progress claim (No. 2) made on 3 December 2012 and that plumbing work (on progress payment No 3) had not been done at the time the invoice was issued. 41Mr Morphett acknowledged that the owner had requested "timber look" tiles in the bathroom. He acknowledged that the tiles had been laid contrary to the client's specific instructions as to the pattern to be adopted. 42He also accepted under cross-examination that there was no fall at all provided in the bathroom floors. 43Further, Mr Morphett acknowledged that the door openings had not been aligned as shown on the plans and that an existing door that required cutting down had been incorrectly cut on one side only. 44Mr Morphett acknowledged that when confronted by the owner with expressions of dissatisfaction with his work he had responded that he was satisfied with the work. 45The builder relied on a filed bundle of documents tendered and identified as exhibit 3. The bundle relevantly included: A statement of Mr James Morphett, sole director of the building company, dated 5 September 2013. A statement of Mr James Morphett dated 25 July 2013 and another dated 31 October 2013. Expert report of Colin Cass dated 28 October 2013 and supplementary report dated 22 January 2014. Expert report of Tony Ransley dated 2 May 2014. 46In addition to the above-mentioned documents the following documents were tendered at hearing, E-mail from Daniela Baguley to James Morphett dated 14 January 2014 (exhibit 1), Water pooling diagram following joint flood tests, dated 8 May 2014 (exhibit 4), Bundle of eleven photographs (exhibit 5), Published article of Colin Cass on falls to floor finishes (exhibit 6), Correspondence between the parties' solicitors regarding fault finding equipment (exhibit 7), Joint report (as amended) filed by Colin Cass, Leo Stanton and Tony Ransley at 11am on 11 June 2014 following conference on 10 June 2014. 47The expert evidence relied on by the parties was as mentioned above. 48In addition, the experts (Mr Stanton and Mr Cass) had met on site on 8 May 2014 and had carried out certain flood tests to the bathroom floors. 49The experts were refreshingly cooperative and helpful in their efforts to resolve issues, but necessarily there remained some differences of opinion. 50In particular the joint position paper, filed by the experts on the morning of the second day of the hearing clearly set out the respective positions of the experts.

FACTS 51As the builder's claim was fully settled during the course of the hearing it was unnecessary to make any findings of fact in regard to that application. 52In regard to the home-owners' claim it was necessary to consider each of the alleged defects and the allegedly incomplete work. 53I will refer to each of the items in the Scott Schedule prepared 17 December 2013 and used as the basis for the joint position paper of 11 June 2014.

Items 5.1 to 5.4 54This refers to pooling in the strip drain and the number of waste outlets provided from it. 55It is accepted by the experts that the absence of fall in the strip drain results in some accumulation of water in the drain. The amount of the accumulated water and the potential for deleterious health impact on the home-owners is disputed. It may well be correct, as suggested by Mr Cass, that there is no known building code dealing with the amount of water left standing in a bathroom drain. However, it would appear self-evident that the purpose of a drain is to remove water from the floor after taking a shower and to drain it away. 56I am satisfied the accumulation of water is a problem that the owners' are entitled to have rectified. However, the cost of doing so is covered under item 5.5.

Item 5.5 57Mr Stanton's position was that there was insufficient fall in the bathroom floor to comply with the AS and BCA which resulted in water ponding after flooding. 58Mr Cass's response was that there is no ponding after "normal use of the bathroom" but is evident only after flooding of the floor and that there is consequently no failure to comply with the AS. 59Mr Morphett in his evidence acknowledged that there is no fall provided to the bathroom floor. 60The joint flood tests carried out by Mr Stanton and Mr Cass on 8 May 2014 confirms significant water ponding after flooding (although there was some disagreement about the exact areas in which it occurred). 61In addition, there was the published opinion of Mr Cass on the subject of ponding of bathroom floors (exhibit 6) on which he was cross-examined. In that document Mr Cass acknowledged that the question of "how much fall is enough" is a difficult one with no unequivocal answer. Mr Cass opined that a fall of less than 1:100 inside or outside the shower is a matter that should be clarified with the owner (in writing) before proceeding with the work. Mr Cass further stated that falls of less than 1:100 should not be automatically regarded as a defect, unless associated with ponding. 62Based on the above evidence and expert opinion I am satisfied that the lack of fall in the bathroom floor is a defect. The question of whether the floor should be removed as claimed by Mr Stanton or the subject of localised repair, as suggested by Mr Cass, is considered below.

Item 5.6.11 63This item was agreed both as to liability and quantum in the sum of $70.00.

Item 5.6.1.2 64In regard to this item the only point of difference between the experts was in regard to the chip to the edge of the cabinet. 65On the evidence provided I am unable to conclude that the chip was present at the time of installation or was caused by the builder. 66Otherwise, the item is agreed both as to liability and quantum in the sum of $790.00.

Item 5.6.1.3 67In regard to the claim for correction of the electrical set-out in the bathroom it was Mr Stanton's opinion that the work had not been done in accordance with the contract documents. He stated under cross-examination that the electrical plan had been referred to him but was unable to produce it. Mr Cass confirmed that no contract documents to confirm the electrical lay-out were provided. 68The contract documents were called for but not produced. 69I am not satisfied the home-owners have established their claim for this item.

Item 5.6.1.4 70This item was agreed both as to liability and quantum in the sum of $30.00.

Item 5.6.1.5 71This item related to a chip on the surface of the bath. It was conceded that the home-owners had never complained of this as a defect to Mr Stanton. Mr Cass was unable to locate the chip. There was no evidence that the chip was present at the time of installation or had been caused by the builder since. 72No allowance is made for this item.

Item 5.6.1.6 73This item was agreed both as to liability and quantum in the sum of $35.00.

Item 5.6.1.7 74This item relates to the size of the wall niche in the shower. There was no evidence that the size was stipulated in the contract documents or by subsequent instruction from the owners. It has not been demonstrated to be a defect.

Item 5.6.1.8 75The cost of re-establishing the underfloor heating is included in item 5.5, which is discussed below.

Item 5.7 76This item related to the aesthetics of the plumbing over the vanity being off-set. Whilst it was agreed the issue was relatively small (Mr Ransley had to apply a tape measure to detect the problem) I am satisfied from the photographic evidence provided and the discussion by the experts that there is a lack of aesthetic appeal in the installation. Aesthetics is an important aspect of building work and if left in its present state I am sure it would be a continuing source of dissatisfaction to the home-owners. The experts were unable to agree on a method of rectification that was feasible and would not create different problems, for example by making the vanity off-set to the shaving cabinet. I am satisfied the only reasonable method of resolving the issue is to replace the vanity at a cost of $1870, a sum suggested by Mr Stranton and with which Mr Cass did not disagree.

Items 5.8 to 5.10 77This issue relates to the ponding of water in the trench drain to the en-suite bathroom and is similar to the issue raised at 5.1 to 5.4. In regard to that issue the same expert opinions apply and my findings are the same. 78That is, I am satisfied the lack of fall and consequent accumulation of water is a defect that the owners are entitled to have rectified. 79The larger issue here is the lack of fall to the floor which results in ponding of water following a flood test. 80Mr Cass and Mr Stanton were not as close to consensus on this point as they were for the main bathroom. The diagram (B of exhibit 4) setting out their respective findings however did demonstrate that even on Mr Cass' findings during the joint flood test of 8 May 2014, there was ponding to the floor area around the toilet, which was confirmed under cross-examination. 81For the reasons set out above at 5.5 I am satisfied the fall of the floor is a defect for which the applicants are entitled to be compensated. The appropriate method of rectification and the level of compensation is addressed below

Items 5.11(A), 5.11(B), 5.11.1.2 82These were items of allegedly incomplete work. During the course of the hearing the builder accepted liability for these items, which was in total $2,243.00.

Item 5.11.1.4 84This item related to the opening not aligning with the opening to the en-suite. 85Mr Ransley disagreed that this was a defect on the basis that no contract documents were provided to demonstrate that the alignment was required. However, Mr Morphett, under cross-examination, acknowledged that he had received scaled drawings from the owners (during the course of the works) that required the openings to be in alignment. Mr Morphett claimed that the opening needed alteration but without giving any reason for doing so. 86Based on the above I am satisfied the contract required the openings to be aligned and the failure to do so is in breach of the builder's obligation. There was no disagreement between Mr Ransley and Mr Stanton as to quantum. I allow the sum of $540.00.

Item 5.11.1.5 87This item was rectified during the inspection by the experts.

Item 5.11.16 88Mr Ransley initially disagreed with Mr Stanton on this issue, which relates to rough plasterboard joints. Under cross-examination Mr Ransley no longer disputed that the item was a defect but claimed that the amount suggested by Mr Stanton was "a bit high". 89Although painting was not part of the contracted work I am satisfied that it was done to this area in the expectation that the work was satisfactory. As the joints now require rectification I am satisfied that repainting should be part of the compensation. I allow the sum claimed being $810.00.

Item 5.12 91In regard to this item Mr Morphett, under cross examination, agreed that it was a defect in that when cutting down the door, an equal amount should have been cut off each style. Mr Ransley's opinion is that the door is "fit for purpose" (which it is) and there is no obvious aesthetic loss. 92I am satisfied that the appearance of the door is lop-sided and not aesthetically pleasing. The owners are entitled to have it done correctly. 93I allow the sum of $2,555.00 being the cost calculated by Mr Stanton, without any allowance for painting.

ISSUES FOR DETERMINATION 94I have determined the factual issues necessary to finalise this matter as noted above with the exception of the compensation payable in respect of items 5.5 and 5.8 to 5.10

APPLICATION OF RELEVANT LAW 95As already mentioned, the builder's claim was entirely resolved. Furthermore the builder accepted liability in regard to items of allegedly incomplete work set out at 5.11(A), 5.11(B) and 5.11.1.2 of the Scott Schedule. 96Consequently there is no necessity for me to make a determination of when, and in what circumstances the contract terminated. Suffice to say that the working relationship between Mr Morphett and Mrs Baguley broke down; both were upset and unable to resolve the various issues. 97The home-owners claim in regard to defective work is made pursuant to the statutory warranty provided by the builder under the HBA s 18B, which provides: 18B Warranties as to residential building work The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work: (a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment. 98For the reasons expressed above, I am satisfied that the work was defective as noted and that the builder is in breach of the warranty provided by s 18B(a). 99The starting point under contract law is stated in the rule established in Robinson v Harmon [1848] 154 All ER 365 where it was said: "The rule of common law is, that where a person sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed." 100That rule has been qualified by the decision of the High Court in Bellgrove and Eldridge [1954] 90 CLR 613 a decision to which I was taken by the home-owners' submissions when they relied on a passage from that decision in which it was said: "..her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give her the equivalent of a building ...which is substantially in accordance with the contract..." 101So much is no more than a re-statement of the common law principle already referred to. However, the High Court went on to qualify the rule by saying: "...not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt." 102That decision was further clarified and commented on by the decision of the High Court in Tabcorp Holdings Ltd. v Bowen Investments Pty. Ltd. [2009] HCA 8, to which I was referred by Mr Birch. 103It is important in my view, in determining whether to adopt the course of action suggested by Mr Stanton that consideration be given to the above mentioned principles. 104Mr Stanton was of the opinion that it was not feasible, due to the direction, size and laying pattern of the floor tiles to undertake localised repair as suggested by Mr Cass. Hence, it is necessary to undertake the more expensive rectification option of removing the tiles and replacing them after correcting the fall. 105That method of rectification has the added advantage in my view that the less significant defects found at items 5.1 to 5.4 and 5.8 to 5.10 which related to the accumulated water in the trench drains can be attended to at the same time. But for the problem of lack of fall to the bathroom floors it is likely that the significance of the water accumulation in the drains would not have been sufficient to require the tiles to be taken up. 106Furthermore, the method of rectification proposed by Mr Stanton also deals with the issue of potential damage to the underfloor heating. 107Mr Cass, in dealing with the potential damage to the underfloor heating acknowledged under cross-examination that the position he had taken at conclave was not based on the correct fact that the underfloor heating had been installed by the builder. Mr Cass also acknowledged that in removing the tiles it would be necessary to score to the depth of the tiles, penetrate the adhesive at the top of the tile-bed and that would likely cause damage to the heating wiring. 108For the above reasons I am satisfied that the proposed method of rectification as suggested by Mr Stanton is both necessary and reasonable in order to achieve contract compliance. 109In regard to item 5.5 I therefore allow the sum of $14,645 and in regard to item 5.8 to 5.10 I allow the sum of $11,010.00. Item 5.6.1.8 is included in 5.5.

CONCLUSION 110Hence, for the above reasons I am satisfied the home-owners are entitled to compensation in the total sum of $34,598.00. 111This sum should now be set off against the sum agreed in respect of the builder's claim, being $24,818.00. The net result is that the builder is to pay the home-owners the sum of $9,780.00.

COSTS 112This is an unfortunate dispute that has engaged the parties for some eighteen months and has involved them in substantial expenditure of time and money. 113The end result is not a large amount of money in the scheme of things. It will certainly be disproportionate to the amount the parties have already expended on their respective advice and representation. The dispute and the costs involved has been in large measure brought about by the antipathy between Mrs Baguley and Mr Morphett, both of whom were unable to put that issue aside at an early stage of proceedings. 114In an attempt to avoid the parties being involved in further disputation in regard to costs I have expressed below a preliminary view of how the issue should be resolved. If there are matters of which I am unaware that prevents resolution I have made directions to allow further ventilation of the issue. 115Both parties have had some success with their respective applications. However, the two day hearing on 9 and 10 December 2013 was adjourned because of the owners' election to rely on different expert evidence. It would therefore appear to be appropriate that the owners' pay the builder's costs thrown away due to that adjournment. Otherwise, it would be my preliminary view that each party should pay their own costs. Jeffery Smith Senior Member Civil and Administrative Tribunal of New South Wales 11 July 2014

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 September 2014

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Judgment (28 paragraphs)

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