Hall v Ku-ring-gai Council

LEGISLATION CITED : Local Government Act 1993 Uniform Civil Procedure Rules

Australiawide Airlines Limited v Aspiron Pty Limited [2006] NSWCA 365 Bitannia Pty Limited v Parkline Constructions Pty Limited [2009] NSWCA 32 CASES CITED : Champagne View Pty Limited v Shearwater Resort Management Pty Limited [2000] VSC 214 at [101] Prodomos Anastasi Foukkare v Angreb Pty Limited [2006] NSWCA 335 Garwolin Nominees Pty Limited v Statewide Building Society [1984] VR 469

PARTIES : James Anthony Hall - Plaintiff Ku-ring-gai Council - Defendant

COUNSEL : Mr K Connor SC/Mr S Glascott - Plaintiff Mr NJ Williams SC/Ms M Allars - Defendant

SOLICITORS : Robert T Dunn & Co - Plaintiff Deacons - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

30092/2008 - James Anthony HALL v KU-RING-GAI Council

JUDGMENT 1 HIS HONOUR: Nature of Proceedings The plaintiff moves on an Amended Notice of Motion for the following orders: "1. The plaintiff be granted leave under Rule 12.1(1)(b) to file a notice of discontinuance of the proceedings within 7 days. 2. Upon filing of a notice of discontinuance in accordance with order 1 above, an order under Rule 42.19(2) that the defendant pay the plaintiff's costs of the proceedings. 3. The defendant pay the plaintiff's costs of the motion."

The Amended Motion was filed and served on 2 April 2009. 2 The defendant does not oppose that part of the motion seeking leave to discontinue the proceedings. It does oppose the plaintiff's application for costs, both of the proceedings and of the motion. The defendant's position is that the plaintiff should pay its costs or alternatively, each party should pay his or its own costs of the proceedings.

Factual background 3 At all material times the plaintiff was a councillor on the Ku-ring-gai Council (the Council). On 17 April 2008 the plaintiff sent an email to the Council's General Manager complaining about one of the Council staff. The plaintiff referred to action by that person as "obstructionist". Subsequently, a complaint was made to the General Manager about that communication. The author of the complaint was not identified to the Court. 4 On 21 April 2008 the plaintiff sent an email to a Mr Harvey, with a copy to a Ms Johnson, which had as attachments a number of other emails. The subject matter was the use of the St Ives Showground. On 23 April the Mayor at the time, Councillor Ebbeck, made a complaint to the General Manager about that email. 5 Both complaints alleged breaches of the Council code of conduct. The code of conduct had been adopted from the Model Code of Conduct for Local Councils 2004. Section 10 of that code provided for a complaints process. 6 Both complaints were considered by the Conduct Committee of the Council. Having received written submissions and heard oral submissions on behalf of the plaintiff, the Conduct Committee made the following findings and resolutions.

In respect of the 17 April email (Complaint No 922208):

(i) It determined there was a prima facie beach of s 5.3 of the code which required a Councillor to treat others with respect at all times, clause 8.2 which required Councillors to refrain from directing or influencing other members of staff of the Council in the exercise of functions and clause 8.8 that provide that it was inappropriate for Councillors to be "overbearing or threatening" to Council staff or to direct or pressure Council staff in the performance of their work or recommendations they should make;

(ii) It resolved to forward the matter to the Council in a formal report recommending that the plaintiff be censured for misbehaviour in accordance with s 440G of the Local Government Act 1993 (the LG Act).

In respect of the 21 April email (Complaint No 940857).

(i) It determined that there was a prima facie breach of clause 5.1 of the code which required a Councillor to avoid conduct that was "improper or unethical"; and

(ii) resolved to forward the matter to Council in a formal report recommending the censure of the plaintiff for misbehaviour in accordance with s 440G of the LG Act. 7 Under the Council code of conduct, the Conduct Committee was made up of some Councillors and the General Manager. There was an issue in the proceedings about the extent to which Councillor Ebbeck had participated in the deliberations of the Conduct Committee. There was known to be ill feeling between the plaintiff and Councillor Ebbeck. On 22 July 2008 the Council adopted the 2008 Model Code of Conduct which amongst other things provided for a different complaint process and a Conduct Committee which was independent of the Council. 8 On 21 July the plaintiff was advised of the Conduct Committee's findings and recommendations. On 28 July 2008 the plaintiff commenced these proceedings by summons seeking injunctive and declaratory relief in respect of the Conduct Committee's findings and resolutions. The Council was served that day. 9 On 29 July the Council met and passed the following resolutions.

In relation to the 18 April email, the Council resolved:

A. That the Council receive and note the contents of the report.

B. That as per clause 10.17 of the Code of Conduct, Councillor Hall be censured by the Council for misbehaviour in accordance with s 440G of the Local Government Act.

C. That Council, under s 11 of the Code of Conduct, refer the matter to the Department of Local Government seeking the Councillor's suspension due to this being the Councillor's third censure.

D. That as from today, the Councillor must send all communications for Council staff or Directors via the General Manager.

E. That, additionally, the General Manager sends to the Department of Local Government for consideration under s 11.6 of the Code of Conduct, the email and the subsequent correspondence, that was written by Councillor Hall on Tuesday, 8 July 2008, which was copied to the Department of Planning.

In relation to the 21 April email, the Council resolved:

A. That Council receive and note the contents of the report.

B. That as per clause 10.17 of the Code of Conduct, Councillor Hall be censured by the Council for misbehaviour in accordance with s 440G of the Local Government Act.

C. That Council under s 11 of the Code of Conduct, refer the matter to the Department of Local Government seeking the Councillor's suspension due to this being the Councillor's second censure. 10 On 30 July 2008, the plaintiff by facsimile sent at about 1pm, foreshadowed amendments to his summons and sought an undertaking from the Council by 3pm that the Council would not refer the matters to the Department of Local Government before the return date of the summons on 7 August 2008. At 3.22pm the Council's solicitors advised that they did not have instructions to give the undertaking sought and asked to be supplied with the amended summons and evidence in support. They advised that the Council's further instructions would be sought upon receipt of that material. 11 Thereafter, the plaintiff approached the Common Law Duty Judge and obtained orders restraining the Council from referring any of the matters to the Department of Local Government or the Director General. The orders were served on the Council by facsimile at 6.58pm. The orders were to remain in effect until 4 August. 12 On 4 August the matter came before the Duty Judge, at which time consent orders were made. The restraining orders were to continue until further order of the Court, provided the plaintiff conducted the proceedings expeditiously. The plaintiff was to file and serve an amended summons by 4 August 2008 and a timetable was set for the filing of evidence. The matter was made returnable before the Court on 8 October. 13 In the amended summons the plaintiff sought, in addition to declarations and orders quashing the Conduct Committee's report, declarations and orders quashing the Council resolutions and restraining it from referring the matter to the Department of Local Government. 14 On 13 September 2008 local government elections were held in New South Wales. The result of the election in Ku-ring-gai was that five of the Councillors were re-elected (including the plaintiff and Councillor Ebbeck) and five new Councillors were elected. 15 In accordance with the consent orders of 4 August, the plaintiff filed points of claim and each side filed some evidence. On 8 October the Court made further consent orders. By two letters dated 28 and 29 October 2008 the plaintiff offered to discontinue the proceedings on condition that his costs were met and that Council not pursue the Conduct Committee's resolutions challenged in the proceedings. When the Council requested an estimate of costs, it was advised by letter dated 3 November 2008 that the costs were estimated at $37,308.50. The offer remained open until 17 November. 16 On 11 November 2008 one of the newly elected councillors moved a motion rescinding the previous resolutions of the Council which related to the plaintiff. That motion was unanimously passed. In passing the motion it was noted that the rescission resolution "in no way reflected on the integrity or actions of the General Manager, members of the Code of Conduct Committee or the previous Council in handling these matters". 17 By letter dated 17 November 2008 the Council noted that the rescission resolutions had removed the substance of the plaintiff's claim and offered to consent to the dismissal of the proceedings with no order as to costs. By letter dated 18 November 2008 the plaintiff refused that offer on the basis that the summons also sought orders quashing the findings of the Conduct Committee. 18 The matter next came before the Court on 19 November. By consent the Court ordered a further timetable in which the plaintiff was to file his evidence by 5 December and the defendant by 27 January 2009. The matter was to come back before the Court on 11 December. 19 By letter dated 25 November 2008 the plaintiff foreshadowed filing a notice of motion for discontinuance and an application for costs. On 2 December 2008 the plaintiff filed a motion which sought the following orders:

1. The plaintiff be granted leave to discontinue these proceedings on the term and condition that the defendant pay the plaintiff's costs of the proceedings as agreed or assessed pursuant to rule 12.1(1)(b) of the Uniform Civil Procedure Rules .

2. The defendant pay the plaintiff's costs of this notice of motion. 20 By letter dated 3 December the Council offered to consent to the plaintiff being granted leave to discontinue the proceedings but with each party paying its own costs. By letter dated 5 December 2008 the plaintiff offered to settle the proceedings on the basis that the Council pay his costs of $30,000. The matter did not settle. 21 When the matter came before the Court on 11 December 2008, the form of the motion caused considerable difficulty. It would be fair to say that the submissions made were confused and confusing. The plaintiff was saying that he did not wish to proceed with the summons but only wished to argue the question of costs. However, if he were unsuccessful in obtaining his costs, he then wished to proceed with the summons. The Council submitted that the rescission of the Council resolutions did not deal with all of the relief sought in the summons and that the outstanding matters in the summons should proceed to a hearing. It sought orders for the filing of evidence. Counsel for the plaintiff submitted that the defendant's difficulty would be overcome if those parts of the summons seeking relief in respect of the decisions of the Conduct Committee were removed and foreshadowed amending the summons to that effect. The Registrar made orders for the filing of a tender bundle and evidence. 22 Whatever tentative agreement had been reached before the Registrar was overturned by the letter from the plaintiff's solicitors of 12 December 2008 which included the following: "We advise that the plaintiff will be proceeding to hearing of his notice of motion filed 2nd December 2008 without any further amendment to his summons. We consider further amendment of the summons unnecessary for the plaintiff to succeed on his argument that by the actions of the defendant in rescinding its two earlier resolutions, the plaintiff has already achieved practical success in the litigation and is thereby entitled to payment of his costs of the proceedings. It will be the plaintiff's submission on hearing of his motion that the Court should look to the pleadings as at the date the defendant rescinded its two earlier resolutions (11 November 2008) and as such, subsequent amendments to the pleadings would be of no consequence to the termination of the motion … Should the Court on hearing the notice of motion find that the plaintiff has not achieved practical success, then the plaintiff will be entitled to pursue the summons to a full hearing on the merits of the substantive case in order to obtain the relief originally sought. Only if that point is reached, will we then take steps to finalise the plaintiff's tender bundle and serve the same on you (in voluminous paper copy rather than on CD-R if your client so insists)." 23 If there were any doubts as to the intentions of the plaintiff in relation to the motion these were removed by a subsequent letter from the plaintiff's solicitors of 30 January 2009 which stated: "… It appears to us, however, the abandonment of that relief is not necessary to the determination of our client's notice of motion. We confirm we are not instructed to abandon that relief. In the event orders are made in terms of the notice of motion then obviously that relief will not be sought. If, however, the notice of motion is dismissed, our client will press for that relief."

The relief referred to in that letter were the orders sought in respect of the findings of the Conduct Committee of the Council. 24 By letter dated 24 December 2008 the plaintiff offered to discontinue the proceedings if the Council agreed to pay his costs of the proceedings on a party/party basis, the offer being open until 27 January 2009 after which time it would be withdrawn and the plaintiff would seek indemnity costs. By letters dated 19 January and 22 January 2009 the defendant reiterated its position on costs, i.e. that it would consent to the discontinuance of proceedings by the plaintiff on the basis that each party pay his or its own costs. 25 As previously indicated, it was only on 2 April 2009 with the filing and serving of the amended notice of motion that the plaintiff abandoned his position that if he lost his claim for costs, he would seek to litigate the matters raised in the summons.

Submissions 26 The plaintiff submitted that it was reasonable for him to commence the proceedings and to extend the ambit of the orders sought once the Council passed its resolutions of 29 July 2008. 27 The plaintiff submitted that the effect of the rescission resolutions of 11 November 2008 was to bring about a situation where the plaintiff had in a substantial way obtained the relief which he sought in the proceedings. This was because the legal effect of the rescission resolutions was that the Council resolutions of 29 July 2008 were taken not to have existed. There was no longer any need for the plaintiff to press for the relief sought in orders 5A, 5B, 5C, 5D and 5E in the amended summons. 28 The plaintiff relied upon dicta in Garwolin Nominees Pty Limited v Statewide Building Society [1984] VR 469 at 472 and on the following observation by Gillard J in Champagne View Pty Limited v Shearwater Resort Management Pty Limited [2000] VSC 214 at [101]: "… The cold hard facts are that the plaintiff was seeking relief which would have the effect of ameliorating an undoubted nuisance and by the conduct of the defendants in taking those remedial steps [the plaintiff] has not obtained much of what it asked for in its proceedings. I accept that the plaintiff has not obtained all the relief which it had originally claimed but the steps taken by the defendants represent a substantial proportion of the relief …" 29 The plaintiff submitted that it was reasonable for him to seek leave to discontinue the proceedings when he had obtained the relief he sought in substantial measure. He submitted that the orders sought in relation to the Conduct Committee's findings and recommendations were of no moment. This was because the rescission motions themselves were indicative of a change in approach on the part of the Council and because the adoption by the Council of a new code of conduct with an independent committee hearing complaints, made it most unlikely that anything further would be done in relation to the findings and resolutions of the Conduct Committee. 30 The defendant submitted that the plaintiff had not in substantial measure obtained the relief which he sought. This was because the Conduct Committee's decisions of 8 July 2008 remained valid and legally effective. They were not affected by the Council's rescission resolution. The relief sought in paragraphs 1, 1A, 2, 2A, 3 and 3A of the amended summons had not been obtained. It would be open to the Council to act on the Conduct Committee reports at any time in the future. 31 The defendant disputed the plaintiff's proposition that the effect of the rescission resolutions was to render the July 29 resolutions of the Council null and void. It submitted that they represented no more than a reversal of the original decisions. 32 The defendant submitted that the motion filed 2 December 2008, did not comply with rule 12.1(1)(b) of the UCPR. It was not a motion for leave to discontinue. It was no more than an application to the Court to make a preliminary decision as to costs in circumstances where the substantive proceedings would continue if the plaintiff did not obtain a favourable order. The defendant submitted that this was the sort of application disapproved of by the Court of Appeal in Prodomos Anastasi Foukkare v Angreb Pty Limited [2006] NSWCA 335. That situation was not remedied until the amended motion was filed on 2 April 2009. 33 The defendant submitted that insofar as the hearing of the amended motion was concerned, the default position provided for by rule 42.19 should apply. It submitted that in this case the plaintiff should be regarded as having been the unsuccessful party and be treated as such insofar as costs were concerned. The defendant relied upon the analysis of Basten JA in Bitannia Pty Limited v Parkline Constructions Pty Limited [2009] NSWCA 32 and Australiawide Airlines Limited v Aspiron Pty Limited [2006] NSWCA 365. 34 Alternatively, the defendant submitted that the rescission resolutions of 11 November 2008 should be seen as a supervening event which rendered the grant of any relief in respect of paragraphs 5A, 5B, 5C, 5D and 5E of the amended summons futile. The defendant submitted that if that was a correct characterisation of what happened, the appropriate order should be that each party pay his or its own costs. 35 The defendant submitted that the Court should take into account the conduct which occurred prior and during the conduct of the litigation. The Court's attention was drawn to the fact that the plaintiff was represented before the Conduct Committee and was able to put both oral and written submissions on his behalf. In those circumstances, it was reasonable for the Council to defend the proceedings. Following the election of the new Council on 13 September, it acted reasonably in passing the rescission resolutions and in thereafter seeking to settle the litigation. The Court was invited to compare the approach of the Council with that of the plaintiff on the question of settlement. The plaintiff at all times insisted on the payment of his costs, whereas the Council was prepared to compromise on the basis that each party pay his or its own costs.

Consideration 36 The following UCP rules are relevant: "12.1(1) The plaintiff in any proceedings may, by filing a notice of discontinuance, discontinue the proceedings, either as to all claims for relief or as to all claims for relief so far as they concern a particular defendant: (a) with the consent of each other active party in the proceedings, or (b) with the leave of the Court. 42.19(1) This rule applies to proceedings that are discontinued by the plaintiff as referred to in rule 12.1. (2) Unless the Court orders otherwise, or the notice referred to in rule 12.2(2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued." 37 The effect of those rules and their relationship has now been clarified in a series of Court of Appeal decision (Fordyce v Fordham [2006] NSWCA 274; Prodomos Anastasi Foukkare v Angreb Pty Limited [2006] NSWCA 335, Australiawide Airlines Limited v Aspiron Pty Limited [2006] NSWCA 365 and Bitannia Pty Limited v Parkline Constructions Pty Limited [2009] NSWCA 32). Even though Australiawide Airlines related to rule 42.20(1), the approach in each sub-rule is similar, i.e. unless the Court exercises its discretion to otherwise order, the plaintiff must pay the defendant's costs. 38 The effect of those decisions is that in the case of an application to seek leave to file a notice of discontinuance, rule 42.19(2) represents a default position in the absence of further order by the Court. As Basten JA said in Australiawide: "65 In order to avoid the statutory order, it was necessary for the plaintiff to show more than justification, in the sense that it commenced proceedings in the exercise of a statutory right available to it. It would have needed to show some additional factor, such as that conduct of the defendant led it to the reasonable belief that litigation would be necessary to enforce its right to payment in a timely fashion or that winding up the defendant was an appropriate means of obtaining payment. As Bryson JA has shown, by detailed reference to the facts before the Court, Aspiron was unable to demonstrate any such basis for the Court to otherwise order." 39 The "additional factor" relied upon by the plaintiff in this case was that he had substantially obtained the relief which he was seeking when the Council passed its rescission resolutions on 11 November 2008. I accept the plaintiff's submission on this issue. It seems to me that in a practical sense, the plaintiff did so succeed. 40 It is true that the plaintiff did not obtain all that he was seeking in the proceedings and that the findings and resolutions of the Conduct Committee remained untouched. Even so, given the change in approach by the Council, and the unanimous passing of the rescission resolutions, the prospect of the Conduct Committee findings and resolutions being subsequently relied upon was in a real sense remote. This is particularly so when the complaints procedure and constitution of the Conduct Committee had been significantly altered as a result of the adoption of the new Model Code of Conduct by the Council on 22 July 2008. 41 What was obviously of concern to the plaintiff were the censure motions of July 2008 and their possible consequences when referred to the Department of Local Government. The effect of the rescission resolutions on 11 November 2008 was to remove those issues. Despite assertions to the contrary by the plaintiff's solicitors in correspondence, the rescission resolutions had the effect of removing most of the raison d'etre of the litigation. 42 Had a motion in the form of the amended motion been filed in late November or early December 2008, I would have had little difficulty in making an order in favour of the plaintiff that he receive his costs of the proceedings. That did not happen. 43 What happened was the filing of a misconceived application in the form of the motion of 2 December 2008. Despite its purported reliance upon rule 12.1(1)(b) UCPR, it was not an application for leave to file a notice of discontinuance. It was an application for the payment of costs with a condition that if the application were unsuccessful, the substantive matter would proceed. As the defendant submitted, it was the very sort of application which was expressly disapproved of by the Court of Appeal in Prodomos Anastasi Foukkare v Angreb Pty Limited. 44 Beazley JA identified the problem with such an application in Foukkare as follows: "48 Further, the process involved in discontinuance is precisely provided for in the UCPR. First, a party files a Notice of Discontinuance, either by consent or leave of the Court: UCPR 12.2. If a party discontinues it must pay the costs unless some other order is made by the Court. A Court, as a practical matter on an application for Leave to Discontinue, upon being told that the real issue is costs, might not formally make the order for leave until it has heard and determined the costs question. However, not even that practical process accommodates his Honour's understanding of para 6(c). In my opinion, the offer in para 6(c) was postulated on there being no order made in the proceedings. As I say below, I consider that the offer was carefully drafted to avoid the normal consequences of discontinuance. It follows on this approach, that had the appellant agreed to para 6(c), he would have agreed to the Court being asked to determine the issue of costs in proceedings which had no conclusion. 49 Costs orders are not made in gross and in my opinion, the " offer " contained in para 6(c), is not one that could have been, or at least ought to have been, entertained by the Court. Accordingly, the very matter upon which his Honour based his finding of unreasonableness was an offer that required an agreement in respect of a process which could not, or at least, should not, have been undertaken by the Court. For that reason alone, the appellant's failure to agree to para 6(c) could not, in my opinion, be characterised as unreasonable and his Honour's discretion miscarried. … 70 As I have already indicated, I do not consider that the offer in para 6(c) had the effect of asking for a discontinuance. But even if para 6(c) is properly understood in that way, there was no obligation on the appellant to agree to that formula - it is not one for which provision is made by the Rules of Court - and it would not have been unreasonable for the appellant to have refused such a proposal when it was at all times available for the respondents to take a simple procedural step of filing an application for leave to discontinue and an order for costs under UCPR 42.19. The respondents' continuance of the proceedings and in taking the many steps they did in the Supreme Court proceedings was, in my opinion, the overwhelmingly unreasonable conduct in this litigation. …" 45 Comments to similar effect were made by Basten JA in Bitannia: "68 If the plaintiff is unable to obtain consent to a different costs order, but intends to discontinue in any event, the plaintiff has two options: either it can accept an unconditional consent and seek by motion some other order with respect to costs, or it can file a notice of motion seeking leave to discontinue and seek an alternative costs order in that motion. Which course is adopted may depend upon whether it is thought to be better to file the notice of discontinuance, thereby stopping the accrual of costs which will be payable automatically, absent an alternative order, or to allow costs to accrue for the purpose of the leave application on the basis that they will be dealt with by the court in due course in any event. ..." 46 Had the original motion proceeded to a hearing, the plaintiff would have failed because as Beazley JA pointed out, the Court would have refused to entertain it. The problems created by the form of the notice of motion can be seen in the difficulties experienced by both sides and the Registrar in trying to articulate their positions in relation to it on 11 December 2008. The motion was quite inappropriate and was always liable to be struck out. 47 Shortly before the matter came on for hearing, the plaintiff's legal advisers recognised the problem and the amended motion was filed and served. That motion is in the conventional form and complies with UCPR 12.1(1). 48 For the reasons already given, I am of the opinion that the plaintiff is entitled to succeed on his amended motion in that the rescission resolutions of 11 November 2008 had the effect of giving to the plaintiff practical success in the proceedings. The problem confronting the Court is how to deal with the plaintiff's misconceived position which he maintained between 2 December 2008, when the motion was filed, and 2 April 2009 when it was amended. 49 It is clear from the exchange before the Registrar on 11 December that needless time and money has been wasted by the parties in pursuing and in getting ready to meet the false issues raised by that motion. In those circumstances, not only should the plaintiff not have his costs of the proceedings between those dates, but he should pay those of the defendant. 50 In relation to the amended motion, the plaintiff is entitled to succeed. The plaintiff should be given leave to file a Notice of Discontinuance and is entitled to an order in relation to costs which is different to the default position provided by r 42.19(2). That costs order, however, should only apply to the period up to but not including the filing of the motion on 2 December 2008. 51 The final question to be resolved is the costs of the hearing of the amended motion. On the basis I have indicated, the plaintiff has succeeded on that motion. Normally costs would follow the event. In this case, however, there are countervailing considerations. 52 The amendment to the motion was made late and only after receipt of the defendant's written submissions. Until the motion was amended, the defendant had every right to expect that it would succeed on the motion as it then stood. By the time the motion was amended, the defendant had already incurred costs in defending it. In those circumstances I consider it would be unfair for the plaintiff to have his costs of the motion. The most appropriate order is that each party pay his or its own costs of the motion.

Orders 53 The orders which I make are as follows:

(1) I grant leave to the plaintiff under Uniform Civil Procedure Rule 12.1(1)(b) to file a Notice of Discontinuance in respect of these proceedings.

(2) I direct that the plaintiff file such a Notice of Discontinuance within seven (7) days.

(3) I order the defendant to pay the plaintiff's costs of the proceedings up to and including 1 December 2008 as agreed or assessed.

(4) I order the plaintiff to pay the defendant's costs of the proceedings and of the motion incurred between 2 December 2008 and 2 April 2009 as agreed or assessed.

(5) In respect of the period 3 April 2009 up to and including the hearing of the motion before me on 6 April, I order that each party pay his or its own costs. **********

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