Essential Energy v Rose

LEE J: 1 This application for leave to appeal requires initial examination of the foundational premises of the argument of the applicant (Essential). 2 The relevant details are set out in the judgment of the primary judge (Rose v Essential Energy [2020] FCA 124 (J)), and do not require repetition. In short, the respondents, Mr and Mrs Rose, asserted that they reasonably believed that they may have a right to obtain relief in the form of damages from Essential for loss and damage suffered by them as a result of the Tathra bushfire in negligence, nuisance and/or for breach of s 60 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL). 3 Importantly, Essential accepted below that Mr and Mrs Rose have a reasonable belief that they may have the right to obtain relief in tort, but nonetheless contended that Mr and Mrs Rose do not meet the requirements of the rule providing for preliminary issue discovery in r 7.23(1)(a) of the Federal Court Rules 2011 (Cth) (FCR) for two reasons. First, it says that Mr and Mrs Rose's prospective claim under the ACL cannot found a reasonable belief as required; and secondly, it says, if that be so, the prospective negligence and nuisance claims "cannot be brought in this Court for want of jurisdiction": at J[70]. 4 Deconstructing this argument into quasi-syllogistic form, it can be stated as follows: (a) the ACL claim is "liable to be struck out": at J[94]; (b) the ACL claim is the only "federal aspect" of the prospective claim articulated; and (c) therefore, no "federal aspect" of the claim can ground a reasonable belief in a cause of action that is within the jurisdiction of the Federal Court. 5 The difficulty with this argument is that even if the "major premise" ([4(a)]) was correct, the "minor premise" ([4(b)]) is incomplete and the conclusion ([4(c)]) is flawed. To explain why this is so, it is necessary to revisit some important principles relating to the invocation of federal jurisdiction. 6 As I explained in Oliver v Nine Network Australia Pty Ltd [2019] FCA 583 (at [11]-[13], [17]-[18]), for those interested (and everyone practising in courts exercising federal jurisdiction should be), the relevant principles are explained in detail by Allsop J (as the Chief Justice then was) writing extra-curially in the article "Federal Jurisdiction and the Jurisdiction of the Federal Court of Australia in 2002" (2002) 23 Aust Bar Rev 29. The starting point is s 39B(1A)(c) of the Judiciary Act 1903 (Cth) which provides: The original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter: ... (c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter. (emphasis added) 7 The "matter" is the justiciable controversy between the actors involved, comprised of the substratum of facts representing or amounting to the dispute or controversy between them. It is not the cause of action and is identifiable independently of a proceeding or proceedings brought for its determination: Fencott v Muller (1983) 152 CLR 570 (at 603-8 per Mason, Murphy, Brennan and Deane JJ); Australian Securities and Investments Commission v Edensor Nominees Pty Limited [2001] HCA 1; (2001) 204 CLR 559 (at 584-5 [50] per Gleeson CJ, Gaudron and Gummow JJ). 8 When s 39B(1A)(c) of the Judiciary Act was introduced in 1997, Parliament changed this Court from being a court of specific federal jurisdiction into a court of more general federal jurisdiction, extending its reach to all controversies or "matters" across all areas with respect to which the Parliament of the Commonwealth has made laws. So long as a "matter" can be said to "arise under" a law of the Parliament (such as the ACL), then the Federal Court is vested with jurisdiction to hear the whole of the dispute. It follows that once the jurisdiction of the Court has been invoked by reference to a justiciable issue within federal jurisdiction (say, a claim under a federal statute such as the ACL), the Court has jurisdiction to determine the whole "matter" or controversy between the parties: Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 (at 584-8 [136]-[147] per Gummow and Hayne JJ). Accordingly, as a matter of impression and practical judgment, if a claim in negligence or nuisance not otherwise within federal jurisdiction arises out of the same "matter" which is within federal jurisdiction, then it will form part of the one justiciable controversy and, if the jurisdiction of this Court is invoked, it will be the duty of this Court, exercising Chapter III judicial power, to quell the whole controversy. It is, of course, heterodox to speak of any notion of concurrent state and federal jurisdiction. 9 As was pointed out per curiam in Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 (at 219 per Bowen CJ, Morling and Beaumont JJ), the Court's jurisdiction is to "determine each of the claims which together constitute a federal 'matter'". Any other approach would mean that "the existence or absence of jurisdiction to deal with a particular claim would depend upon the substantive result of that claim". 10 It is also basal that a "matter" may exist prior to the commencement of formal proceedings and be federal in character at that point: Hooper v Kirella Pty Ltd [1999] FCA 1584; (1999) 96 FCR 1 (at 13-16 [45]-[55] per Wilcox, Sackville and Katz JJ); Rana v Google Inc [2017] FCAFC 156; (2017) 254 FCR 1. A "matter" exists independently of a proceeding later commenced. The distinction between a proceeding and controversy is critical to bear in mind. In Hooper v Kirella, the Full Court of this Court held that jurisdiction can be conferred on the Court in respect of preliminary discovery for a controversy, even though proceedings claiming substantive relief in respect of that controversy had not been, and may not ever be, commenced. The Court said (at 15 [53] and 15-16 [55]): Of course, if a controversy is the subject of existing proceedings claiming substantive relief the scope of the controversy (or "matter") is likely to depend, in part, on what the parties allege in the pleadings and how they have conducted the litigation: Abebe at 561 [139]; 38-39 [139], 562-563 [145]; 40 [145], per Gummow and Hayne JJ. But that does not mean that unless a party has instituted proceedings claiming substantive relief there can be no matter in respect of which jurisdiction can be conferred on the Federal Court. It is the justiciable controversy which constitutes the matter. That controversy may or may not be co-extensive with legal proceedings already instituted. … In determining whether there is a "subject matter for determination in a legal proceeding" in respect of which Parliament can define the jurisdiction of a federal court, it is doubtless necessary for the relevant matter to be capable of identification. Doubtless, too, there can be no matter unless a claim is made that can be seen to involve "an immediate right, duty or liability to be established by the determination of the Court". But it is only a claim (with the necessary federal elements) that is necessary. A matter can exist even though a right, duty or liability has not been established and, indeed, may never be established: Abebe at 528 [32]; 12 [32], per Gleeson CJ and McHugh J. It is for this reason that the Federal Court may have jurisdiction in respect of a matter, even though the only federal element of the matter has failed: Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 (FC) at 218-219; Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481 (FC) at 481-482 (where the federal claim was struck out). 11 Like in Oliver, any recondite ways that jurisdiction is attracted (such as suggested by Mr and Mrs Rose below: see J[123]) can be put to one side for present purposes because the invocation of federal jurisdiction in the present case is quite straightforward. Even if it was to be accepted that the ACL claim is "liable to be struck out", that does not mean the "matter" has not always been within federal jurisdiction since the assertion was made prior to any proceeding being commenced: Burgundy Royale (at 219 per Bowen CJ, Morling and Beaumont JJ). As the now Chief Justice noted in (2002) 23 Aust Bar Rev 29 (at 45): Once a non-colourable assertion is made, that clothes the court with federal jurisdiction, which, once gained, is never lost. Owen Dixon KC's testimony to the Royal Commission on the Constitution in 1927 put the matter in pungent practical terms: So, if a tramp about to cross the bridge at Swan Hill is arrested for vagrancy and is intelligent enough to object that he is engaged in interstate commerce and cannot be obstructed, a matter arises under the Constitution. His objection may be constitutional nonsense, but his case is at once one of Federal jurisdiction. 12 "Colourable" imports improper purpose, or a lack of bona fides. It is not judged by reference to the strength and weakness of the case alone. Improper purpose or lack of bona fides carries with it the notion of an abuse of process. Although said to be hopelessly misconceived, there is no suggestion here that that prospective ACL claim was raised colourably. Federal jurisdiction was thereby attracted and once federal, the matter is always federal: Hooper v Kirella (at 13-16 [45]-[55] per Wilcox, Sackville and Katz JJ). If an allegation is made bona fide, the Court is properly seized with jurisdiction to deal with the controversy and always will be, even if the non-colourable allegation was not pursued and hence was unnecessary to decide, otherwise abandoned, struck out or otherwise rejected on the evidence adduced at trial. 13 Senior counsel for Essential, Mr Cheney SC, made two general points about these matters. The first was to rely on the decision of the majority (Moore and Gilmour JJ) in Apache Northwest Pty Limited v Newcrest Mining Limited [2009] FCAFC 39; (2009) 182 FCR 124 (at 127 [7]-[8]): In our opinion, Newcrest has failed to establish the existence of a reasonable cause to believe it has a cause of action under s 82. Different considerations arise in relation to the contractual claim but it is unnecessary to detail them. We say that because we would refuse preliminary discovery as a matter of discretion in circumstances such as the present where it is not established that there is a reasonable cause to believe the existence of a right to obtain relief in relation to the federal aspect of the claim which, if ultimately pursued, would engage the jurisdiction of the Federal Court. The power of a judge of this Court to order preliminary discovery exists in aid of the exercise of the jurisdiction of the Court. If it is not apparent from the material filed in support of the application that the jurisdiction might be regularly invoked, then, in our opinion, no order should be made. That is not because we have concluded that the present application for preliminary discovery itself is colourable in the sense discussed in Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212. We have not. An application can fail without being stigmatised in this way. It is, in our opinion, unnecessary to enter the debate of whether, as a matter of power, preliminary discovery could be ordered in the present circumstances as, for the reasons we have set out, no such order should be made in any event. However, we do not doubt that this Court has jurisdiction to hear and determine this application. 14 On reading these paragraphs, it might be thought that what the majority were saying was that, because preliminary discovery aids the exercise of the jurisdiction of the Court, where there is no information before the court suggesting that the federal aspect of the claim has merit, then no order can be made because the jurisdiction has not been engaged, even if the federal claim could not be stigmatised as being colourable. 15 But on a close reading, I do not think that Moore and Gilmour JJ were making that point. Ultimately, the grant of relief by way of preliminary discovery is discretionary and the view actually expressed by their Honours was that, if the aspect of the controversy which causes the matter to be wholly within federal jurisdiction is devoid of any substance on the evidence before the Court, then this will be a discretionary factor mitigating against the grant of relief. It would be irreconcilable with fundamental aspects of the way in which federal jurisdiction operates for it to be read in any broader sense. 16 Mr Cheney's second point was that FCR 7.23(1)(a) is directed to a belief reasonably held relating to a right to obtain relief from the Court, and it followed that if the Court considered that the claim under the ACL was amenable to summary dismissal pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) (Act), then the striking out of the claim would mean that the Court would thereafter be deprived of jurisdiction and no relief could be obtained in the Court. For reasons I have explained above, that submission is wrong. 17 In these circumstances, the concession of Essential that Mr and Mrs Rose have a reasonable belief that they may have the right to obtain relief in tort (being a claim to relief that was part of the one "matter" within federal jurisdiction) would have been sufficient to enliven the operation of the preliminary discovery rule, even if Mr and Mrs Rose now disavowed an intention to advance the ACL claim. 18 Be that as it may, Mr Cheney's principal complaint relating to the primary judge's reasons was that after summarising the competing contentions of the parties in relation to cl 5.1 of the Connection Contract, her Honour held (at J[112]) that it was not necessary to determine the proper construction of the contract and observed: The proper construction of the Connection Contract is not a matter to be determined on this application. The construction contended for by Mr and Mrs Rose is not such that no reasonable person apprised of the material now before the Court would believe that a right to obtain relief based on the ACL claim might exist. Essential raises a number of complex legal arguments as to why Mr and Mrs Rose's construction should be rejected. These are matters to be determined at a trial after hearing fully from the parties and considering the material in detail and not on an application of this nature. Suffice to say on the material presently before the Court I am satisfied that the construction of the Connection Contract contended for by Mr and Mrs Rose gives rise to a reasonable belief that they may have a claim for relief against Essential based on the ACL Claim. 19 It is contended that her Honour gave no reasons as to why she reached the conclusion expressed in the last sentence. Although the arguments below had been previously characterised as "technical and somewhat complex", the metes and bounds of the argument concerning the Connection Contract can be seen at: J[34]-[41] (which set out the terms of the contract); J[77] (which sets out the terms of s 60 of the ACL, which, in summary, provides that there is a guarantee that services supplied in trade and commerce to a consumer will be rendered with due care and skill); and at J[82]-[112] (where her Honour comprehensively summarised the submissions of the parties). Under the heading "Consideration", her Honour then identified why it was that the arguments of Mr and Mrs Rose concerning the construction of the Connection Contract were, to use a neutral word, "open" and could in that sense reasonably ground the requisite belief. 20 The key part of the reasoning is at J[110]-[112] which is as follows: Under cl 5.1 of the Connection Contract Essential agrees to do three things: to provide customer connection services which includes "services relating to the flow of energy to" relevantly the Land; to meet other obligations set out in the Connection Contract; and to comply with the energy laws which relevantly are national and State laws and rules relating to energy and the legal instruments made under those laws and rules. Mr and Mrs Rose contend that that clause should be given its ordinary and natural meaning and that "energy laws" is not confined in any way. It includes for example reg 5 of the ES Regulation which provides that a network operator must take all reasonable steps to ensure that the design, construction, commissioning, operation and decommissioning of its network, or any part thereof, are safe. In that way Mr and Mrs Rose say that on the Connection Contract alone it is arguable that the services that are provided include compliance with that regulation which is a requirement that Essential operate the network safely. Essential argues that the Connection Contract should be construed narrowly. In summary it says that the Connection Contract is limited to the customer's ability to receive electricity from the network, i.e. connection services and not network services, and that the reference to "energy laws" should be read such that it is confined to those laws that are "relevant to the Connection Contract" and thus which concern the provision of connection services. In contrast, Mr and Mrs Rose contend that the Connection Contract should not be construed so narrowly and that the reference to "energy laws" should not be confined in the way contended for by Essential. The proper construction of the Connection Contract is not a matter to be determined on this application. The construction contended for by Mr and Mrs Rose is not such that no reasonable person apprised of the material now before the Court would believe that a right to obtain relief based on the ACL claim might exist. Essential raises a number of complex legal arguments as to why Mr and Mrs Rose's construction should be rejected. These are matters to be determined at a trial after hearing fully from the parties and considering the material in detail and not on an application of this nature. Suffice to say on the material presently before the Court I am satisfied that the construction of the Connection Contract contended for by Mr and Mrs Rose gives rise to a reasonable belief that they may have a claim for relief against Essential based on the ACL Claim. 21 These passages were subject to the criticism that Essential was deprived of the ability to understand why it was that her Honour regarded the contentions of Mr and Mrs Rose as being arguable, or put more directly, as being of such a character as being capable of grounding the required belief. 22 I do not consider those criticisms to be well founded or sound. The obligation to give reasons is one which is informed by the circumstances in which the reasons are given and the nature of the decision being made. What her Honour was required to do was to focus on the relevant inquiry which was whether Mr and Mrs Rose had a reasonable belief that they may have a right to obtain relief in the Court from Essential. As was explained in Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCAFC 193; (2017) 257 FCR 62 (at 64 [2] and 66 [8] per Allsop CJ and at 89-95 [98]-[126] per Nicholas J): (a) Preliminary discovery applications are summary procedures and not mini-trials. (b) It is important to bear in mind that the belief that must be reasonable is a belief about something that may be the case not is the case and this important qualification colours, necessarily, the analysis involved in assessing the reasonableness of that belief. (c) In practice, to defeat a claim for preliminary discovery it will be, at least in the practical sense, necessary to demonstrate that there is no reasonable basis for thinking that there may be (not is) such a case. (d) It may prove difficult to disprove a reasonable belief that a case may exist by seeking to demonstrate that aspects of the argument are faulty or contestable. 23 It is evident that her Honour was saying that the contention that the clause should be given its ordinary and natural meaning (and hence that the term "energy laws" is not confined in the way contended for by Essential) was one which was open and hence could ground a reasonable belief. At the end of the day, as her Honour recognised, it may be that the preferred construction is the one for which Essential advocates, although that is not presently relevant. In my view, with respect to the primary judge, the process of her Honour's reasoning is relevantly clear and sufficient. 24 There was another aspect of what I will describe as the "services case" that was advanced by Mr and Mrs Rose. This seemed to focus on a number of subjective musings or communications on behalf of Essential which were said to be relevant to whether or not there was a provision of services. It is unnecessary for me to express a view one way or the other as to this aspect of the claim, other than to note that her Honour was persuaded (at J[116]) that this material was sufficient to establish that arguably the services provided by Essential extend beyond connection services to the provision of a safe network, in that Mr and Mrs Rose are customers who indirectly pay or fund Essential for the provision of that network. The reason it is unnecessary for me to deal with this aspect of the argument is that, even if I was satisfied there was some doubt about the correctness of Mr and Mrs Rose's contentions in this regard, such a doubt would not be determinative of the leave application. 25 The second part of Essential's complaint relating to the primary judge's reasons was that her Honour accepted that the Roses did not have sufficient information to decide whether to commence proceedings in the Court (at J[143]). This position was not pursued in oral argument, but was developed in Essential's written submissions. While her Honour found (at J[142]) that: … while Mr and Mrs Rose may have received material that points to a causal relationship between Essential's infrastructure and the Tathra Bushfire, it has not been provided with any material going to Essential's conduct in relation to that infrastructure … Essential points to a number of documents already produced to the Roses which it says go to Essential's conduct in relation to the infrastructure (at J[53(4)]), including the mechanism of ignition. It also points to other information obtained by the Roses which allowed Mr Rose to form the belief that he may have a right to obtain relief in the form of damages from Essential (at J[46]). On this last point, it is necessary to note that the standard necessary to establish a reasonable belief that one may have to a right to relief, and the standard required to show that there is insufficient information to establish proceedings, are clearly different. The former is cast in the amorphous realm of reasonability and possibility; the latter is binary. A positive finding in FCR 7.23(1)(a) does not lead, inevitably, to the establishment of (b). 26 As to whether there was or was not enough information for Mr and Mrs Rose to commence proceedings against Essential (see FCR 7.23(1)(b)), her Honour, at J[124]-[133], outlined the parties' positions and undertook a consideration of them at J[134]-[147]. Her Honour concluded that "[w]hile a large volume of material has been provided by Essential to Mr and Mr Rose … the material provided is not sufficient in the sense contemplated by r 7.23 of the Rules". Her Honour went on to specify why she reached this view at J[144]-[146]. This included the absence of information going to the state of affairs leading to ignition and the state of the infrastructure at that time. A preliminary report from the NSW Rural Fire Service was held not to be sufficient to enable the Roses to make the necessary determination. This application does not appear to me to involve an attempt to obtain greater comfort in the strength of the Roses case as suggested, rather it concerns whether the Roses have a viable case at all. Such comfort is necessary before proceedings can properly be commenced, being such as would enjoy reasonable prospects of success. 27 The full breadth of the information to which the Roses had access was not before me, nor was it required to be. It was before her Honour who evidently, very carefully, reviewed and considered it. With respect, I see no arguable error in her Honour's approach. 28 I now turn to whether leave to appeal should be granted. As I explained in Nationwide News Pty Limited v Rush [2018] FCAFC 70 (at [2]-[4], comments with which Allsop CJ and Rares J generally agreed), consistent with the facilitation of a just resolution of an application for the grant of leave to appeal, an applicant must usually show that (a) in all the circumstances, the decision to be appealed is attended with sufficient doubt to warrant its reconsideration on appeal, and (b) supposing the decision to be wrong, substantial injustice would result if leave was refused: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (at 398-9 per Sheppard, Burchett and Heerey JJ). The sufficiency of the doubt in respect of the decision to be appealed and the question of substantial injustice bear upon each other so that the degree of doubt which is sufficient in one case may be different from that required in another. 29 As to limb (a), the focus is on the order made for preliminary discovery and, given that I do not consider there to be any merit in the notion that the jurisdiction of the Court could not be properly invoked in relation to the claim in tort by reason of the non-colourable ACL claim, the making of the order is not attended by sufficient doubt as to warrant its reconsideration. Even if I was wrong in that regard, I am independently satisfied that her Honour's analysis as to why the belief of Mr and Mrs Rose was reasonable is not one which reveals any arguable error. Similarly, I do not find that her Honour's conclusion that Mr and Mrs Rose have established that they do not have sufficient information to decide whether to commence a proceeding against Essential is attended by error. 30 Again, even if I was wrong in relation to those two conclusions, in relation to limb (b), I am very far from satisfied that any injustice that would be occasioned, supposing the decision to be wrong, could appropriately be described as substantial. This was a case where her Honour made an order that Mr and Mrs Rose are to pay Essential's reasonable costs and expenses of providing the preliminary discovery. Extensive affidavit evidence was put on about the scope of the discovery process, which could fairly be described as substantial. I accept that there is some imposition on management and officers of Essential to undertake the necessary inquiries in order to ascertain repositories of documents, which will need to be searched in order to comply with the obligation to make reasonable endeavours to comply with the order. Having said that, the costs associated with that process, to the extent that they represent any disbursements on behalf of Essential, or any legal costs associated with obtaining advice about discovery obligations are ones that will, at the end of the day, not be borne by them, pursuant to the terms of the order for costs (other than those costs which are not allowed upon any taxation). 31 Neither limb of the test identified in Decor (at 398-9 per Sheppard, Burchett and Heerey JJ), is made out. The application for leave to appeal should accordingly be dismissed. 32 Before leaving the application, I note that I had given consideration as to whether a grant of leave should be made in order to dispel any misconceptions that may arise as to the proper scope of the majority judgment in Apache v Newcrest, but in the light of what I explained above, I did not, in the end, think that this was necessary when the comments made in that case are properly understood. Whether the discretionary consideration identified by their Honours is in truth a relevant consideration when one has regard to the obligation to deal with matters within the jurisdiction of the Court properly commenced, is not one that needs to be explored for present purposes. 33 Mr and Mrs Rose seek their costs of the dismissal. It is often said that issues such as this should be approached on the basis that costs follow the event. The presently relevant approach is as was explained by Gleeson CJ, Gummow, Hayne, and Crennan JJ in Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 (at 62-3 [25]), and summarised in LFDB v SM (No 2) [2017] FCAFC 207 (at [6] per Besanko, Jagot and Lee JJ), being that: although there is "no absolute rule", one of the "general propositions" regarding an award of costs is that "the award is discretionary but generally that discretion is exercised in favour of the successful party": see also Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 88-89 [40]-[41] per Gaudron and Gummow JJ. 34 Additionally, as the Full Court explained in LFDB (at [7]): … It has often been remarked that the discretion as to costs is unfettered, but in exercising the discretion to award costs, s 37N(4) of the Act requires the Court to take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, namely to facilitate the just resolution of disputes according to law … 35 Relatedly, s 37N(1) and (2) of the Act provide that the civil practice and procedure provisions (which includes under s 43 the power to award costs) must be applied and the relevant power be exercised or carried out "in a way that is consistent with the overarching purpose". It seems to me that there was a straightforward answer to this application for leave to appeal in circumstances where there had been a concession as to the Court's jurisdiction when it was suggested that the Court would be deprived of jurisdiction, if the ACL claim was found to be unarguable. That answer was not advanced in the written submissions before me by those acting for Mr and Mrs Rose. This approach might be thought not to have best facilitated the overarching purpose. 36 Having said that, as it turned out, it was necessary to deal with the broader arguments advanced by Essential. Although I was initially attracted to the idea that Mr and Mrs Rose should only obtain a proportion of their costs, I think in the exercise of discretion, the appropriate order is that Essential pay Mr and Mrs Rose's costs of the unsuccessful leave application. 37 Accordingly, the order of the Court will be that the application be dismissed with costs. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.

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