Larsen v Grace Worldwide

Judgment

1. McCOLL JA: I agree with Macfarlan JA's reasons and the orders his Honour proposes.
2. BASTEN JA: I agree with Macfarlan JA.
3. MACFARLAN JA: On 28 June 2004, the appellants, Mr Terry Larsen and his wife, Mrs Uta Larsen, accepted a quote from the respondent, Grace Worldwide Australia Pty Ltd, to transport their household furniture and other goods from Black Mountain in rural New South Wales to the appellants' house in Stahringen, Germany. On arrival in Stahringen it became apparent that the goods had been vandalised. After receiving unsatisfactory responses to complaints made to the respondent, the appellants commenced proceedings against it in the Common Law Division of the Supreme Court.
4. Following a nine day hearing, Schmidt J directed judgment to be entered in favour of the appellants for an amount of $10,430.47 ([2015] NSWSC 1224; [2015] NSWSC 1706), reflecting loss suffered by the appellants in respect of the damage to their goods. Nevertheless, the appellants failed on their principal claims at first instance. These were for damages for personal injury, including breathing difficulties and skin cancers suffered by them, and damages in respect of losses they suffered concerning properties in Germany. They claimed the personal injuries were occasioned by contamination of some of the transported goods whilst in the possession of the respondent. The property losses included the cost of demolition and reconstruction of the house at Stahringen due to health concerns arising out of the same alleged contamination. The appellants also claimed exemplary and aggravated damages in respect of the same matters. They contended that these damages claims did not attract the limitation in s 21 of the Civil Liability Act 2002 (NSW) as the alleged contamination occurred as a consequence of an intentional act on the part of the respondent done with intent to cause injury or death (see s 3B(1)(a)).
5. In oral evidence before the primary judge, Mr Larsen, who was the principal spokesman for the unrepresented appellants, accepted that their claims of contamination and resulting injury and loss related only to substances found in Germany on a Welsh dresser (a sideboard with drawers or compartments below shallow shelves above) that the respondent had transported for the appellants from Australia (Transcript pp 75-77). The top and bottom parts of the dresser were wrapped separately in bubble wrap for the purposes of the transit. On Mr Larsen's evidence, a "coal tar substance" was spread across about one half of the upper side of the top part. This seemed to have been poured on. On the bottom part there appeared to be a different substance, namely a "grey jelly" like substance which looked as if it had been brushed on (ibid). The expert toxicologists who gave evidence agreed that the test results they analysed (extending not only to furniture but also air in the house, soil samples and clothing: Transcript p 328.5) eliminated any source of contamination other than the tar-like substance (see [30] below).
6. The appellants, who remained unrepresented, commenced their address on appeal by stating that the main issue on the appeal related to procedural unfairness they alleged occurred as a result of the primary judge permitting the respondent to rely at the hearing on an expert toxicological report of Dr Robert Kenyon which was served after the respondent's previously instructed expert, Mr Hugh Scobie, became unavailable. (I note that the appellants unnecessarily sought leave to appeal. As they in fact have a right of appeal, their application for leave to appeal will be treated as an appeal).
7. The appellants also appealed against the primary judgment on other grounds, many of which were not pressed at the hearing in this Court. It is not necessary to deal with the remaining grounds as the appeal clearly fails on the basis that it was not demonstrated that the primary judge erred: 1. Either in finding that the appellants did not establish that the allegedly harmful substances were put or came onto the dresser whilst it was in the possession of the respondent; or 2. In finding that the appellants did not establish that the substances were harmful to their health.
8. It is, however, necessary to deal with an application by the appellants to adduce on appeal evidence further to that which was before the primary judge.
9. For the reasons given below, I have concluded that the further evidence sought to be relied upon should not be admitted, that the appellants have failed to establish that they were denied procedural fairness and that they have failed to establish error on the primary judge's part in dismissing the bulk of their claim. As a result, the appeal should be dismissed with costs.

THE PROCEDURAL FAIRNESS ARGUMENT

1. As is apparent from the foregoing description of the nature of the appellants' claim, critical to its success was that they prove that the foreign substances on the dresser were a probable cause of their health problems. To this end, they relied principally on an expert toxicological report of Dr George Crank. In answer, the respondent initially relied upon the expert toxicological report of Mr Scobie but at a late stage Mr Scobie became unavailable due to his inability to travel outside Canada. As a result, on 9 April 2015 Adamson J gave the respondent leave to rely upon a report to be obtained from Dr Kenyon. There was no evidence on appeal as to when Dr Kenyon's report dated 15 April 2015 was served on the appellants. Mr Larsen, however, asserted from the bar table that he received it on Friday 17 April 2015. To allow the report to be considered by the appellants and their expert, the commencement of the hearing was delayed from Monday 20 April 2015 to Wednesday 22 April 2015. On Thursday 23 April 2015 a conclave between Dr Crank and Dr Kenyon occurred. They produced a joint report later that day. There was a large measure of agreement between Dr Crank and Dr Kenyon.
2. Mr Scobie's report is not in evidence, although presently irrelevant parts of it were sought to be tendered by the appellants for the first time on appeal (see [36] below). However Dr Kenyon's report provides information as to the contents of the remainder of Mr Scobie's report by making reference to a conclave that took place late in 2013 between Mr Scobie and Dr Crank. In his report, Dr Kenyon sets out the ten questions posed in that conclave and gives his own answers. Save for a couple of limited qualifications, Dr Kenyon expressed his agreement with Mr Scobie's responses to the questions. In particular, Dr Kenyon said that he agreed with Mr Scobie's response to the first question which was as follows: "Do the test results obtained by the plaintiffs (the plaintiffs [sic] testing) reveal the presence of substances at concentrations likely to be injurious to the health of people coming into contact with them?"
3. Thus the report indicates that there was no significant difference between Dr Kenyon and Mr Scobie's views. It follows that the necessary change by the respondent to reliance upon Mr Kenyon's report rather than that of Mr Scobie was unlikely to have caused the appellants any prejudice.
4. Nevertheless the appellants contended that they were disadvantaged by the late service of Dr Kenyon's report and that the primary judge should have deferred the commencement of the hearing to enable them and their expert to give it further consideration. However, the appellants made no complaint to the primary judge about the respondent's reliance on the report. Nor did they suggest to her Honour that they were prejudiced in any way by the respondent's reliance upon it. They did not seek an adjournment or oppose the report's admission into evidence. Moreover, Dr Crank did not suggest in the joint report, or in his oral evidence or otherwise, that he had had insufficient time to consider Dr Kenyon's report.
5. I do not consider that the appellants were denied procedural fairness. For the reasons stated above ([11]) they did not make good their argument that they were prejudiced by what occurred. The appellants are plainly intelligent people, Mrs Larsen being a former university lecturer and Mr Larsen being a former pilot. Moreover, they had had experience in dealing with litigation during both the years from the commencement of the present proceedings in 2010 until its hearing in 2014 and in a previous action brought by Mrs Larsen in the District Court which proceeded to judgment and an appeal. In these circumstances the primary judge was well entitled to proceed on the basis that the appellants would inform her if they thought that they had had insufficient time to deal with the respondent's expert report. Accordingly, there were no circumstances that required the primary judge to further adjourn the hearing notwithstanding that neither the appellants nor the respondent asked her to do so.
6. At this point I refer in passing to challenges made by the appellants to the primary judge's rejection of reports of a German real estate agent and a German builder (Judgment [227]-[237]). Both documents were plainly inadmissible for the reasons given by the primary judge. They do not need to be considered further as they related to the quantification of damages which, in light of my findings on liability, is not an issue requiring attention on appeal.

WHETHER THE ALLEGEDLY TOXIC SUBSTANCES CAME ONTO THE DRESSER WHILST IN THE RESPONDENT'S POSSESSION

1. The primary judge found that the evidence did not justify an affirmative answer to this question. Evidence relevant to this finding included Mr Larsen's evidence that the Welsh dresser had been in the barn of the Stahringen property for four years whilst the house was being renovated (Transcript p 77) and that he undertook preparation for the building work in the barn (Transcript p 127) as well as some building work in the very area where the Welsh dresser was stored (ibid). Dr Kenyon said that the substance on the top of the dresser was likely to have been some kind of building product (Judgment [90]). On this basis, and having rejected the appellants' evidence about the dresser, her Honour held that the most likely explanation for the presence of the substance on the dresser was that it had been accidentally spilled on it (Judgment [83]).
2. The principal difficulty for the appellants in challenging this finding is that the only evidence that, if accepted, might have warranted an affirmative answer to the question was that of the appellants. It was only they who said when, and with what result, transported goods were unwrapped and inspected. It was only they who gave evidence that the dresser was not unwrapped until 2006 and that substances were not spilled on it in the course of renovations that occurred at the property before the dresser was first independently tested in 2008.
3. The primary judge found that the appellants' evidence was "neither credible nor reliable" and that "their uncorroborated evidence is not a reliable basis for any findings of fact to be made" ([24] and [25]). Her Honour's detailed reasons for those conclusions were not the subject of specific challenges on appeal. In particular, the appellants did not identify any "inconvertible facts or uncontested testimony" with which the conclusions reached were inconsistent. Nor did they refer to any evidence that rendered the conclusions "glaringly improbable" or "contrary to compelling inferences" (Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[29]).
4. In these circumstances, the appellants did not establish that the respondent breached its duty as a bailee to take reasonable care to deliver the appellants' goods in Germany in the condition that they were in when received into its possession (see Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220; [1971] HCA 26 at 238-40). The evidence (other than that of the appellants) admitted of the possibility that the substances were on the dresser before the goods were shipped. On the other hand, and perhaps more obviously, the evidence suggested the substances may have been placed on the dresser subsequent to their delivery to the appellants in Germany, in the course of building renovations or otherwise. The appellants had the onus of proving that the goods were damaged whilst in the respondent's possession. If they had proved that, the respondent would have been required to prove that it took reasonable care of the goods (ibid), but they did not do so.

WHETHER THE SUBSTANCES ON THE DRESSER CAUSED THE APPELLANTS' HEALTH PROBLEMS

1. This was undoubtedly a question requiring expert toxicological evidence, as the parties implicitly recognised by the manner in which they conducted the proceedings. The appellants complained on appeal that the parties' medical experts, Dr John Walters for the appellants and Dr Edmund Lobel for the respondent, had been required to proceed upon an ill-founded assumption concerning the toxicity of the substances on the dresser. It is not necessary to consider the merits of this complaint as, in light of my conclusion that the appeal fails for reasons related to liability, it is unnecessary to consider any of the issues concerning the appellants' health. While the appellants undoubtedly had, and still have, severe health problems, the evidence of the medical experts did not assist in determining the cause of those problems and is thus not of present consequence.
2. I add at this point that the appellants complained on the appeal that they were not permitted to use at first instance the toxicological report of Dr Chris Winder dated 2 September 2012. However, Dr Winder was deceased and was not therefore available for cross-examination on the report. Instead the appellants relied upon Dr Crank's report. In my view, the appellants have not demonstrated that the primary judge erred in what occurred in relation to Dr Winder's report.

The expert reports

1. In his report of 14 October 2012 Dr Crank referred to tests of the Welsh dresser revealing that the foreign material on it included polycyclic aromatic hydrocarbons (PAH's). He said that the German Technical Regulations for Hazardous Substances (TRGS 551) stated that "any article or material containing more than 50 mg/kg of PAH's is regarded as carcinogenic" and that because the test results provided to him showed "a total level of 1,570 mg/kg of PAH compounds" the material on the dresser was "31.4 times the level considered carcinogenic by the German Authorities (50 mg/kg)". On this basis, he concluded that the dresser was "contaminated with a highly toxic and carcinogenic material containing high levels of Polycyclic Aromatic Hydrocarbons (PAH's)" ([65]).
2. In the joint report dated 23 April 2015 that he prepared with Dr Kenyon, Dr Crank conceded that this reasoning was in error and that he had erroneously understood the German regulation to refer to "50 mg/kg of PAHs" when in fact it referred to "50 mg/kg of benzo(a)pyrene" ("BaP") ([5]). The latter compound was thus identified as a marker for testing levels of PAHs. This was significant because the test report (of the Welsh dresser) that revealed PAHs of 1,570 revealed a level of BaP of only 7.95. A subsequent report showed a level of BaP of 54 mg/kg which was only marginally higher than the level referred to in the German regulation. The evidence did not suggest that this excess was significant.
3. Dr Kenyon's report of 15 April 2015 included the following conclusions: "After careful assessment of the analytical results I found no evidence of significant contamination of the articles within the house, with exception of the Welsh dresser, the structural components of the house or ambient air within the house. The upper section of the Welsh dresser had dark stains on the sections that were sampled and it seems likely that this stain was the source of the PAHs found in the analyses. The concentration of PAHs found on the dresser marginally exceeded the level of 50mg/kg specified in the German Technical Regulations for Hazardous Substances. I do not consider that the dresser constitutes any significant risk to health, either by skin [contact, or] being close by, but believe it would be sensible to dispose of it in the current circumstances. There is no evidence of migration of the PAHs in the dresser into the air or to other articles either by direct contact or through the air. I consider that any outgassing of PAHs from the dresser would be exceedingly slow and constitute no risk to health. Items analysed, other than the Welsh dresser, contained very low levels of PAHs no more than the level found on the exterior barn wall that probably came from general very low level contamination on environmental dusts or fume."
4. As to Dr Crank's error, Dr Kenyon said: "Dr Crank has made a fundamental error in interpreting the EU and TRGS levels for PAH limits being in units of mg/kg. For complex mixtures containing varying proportions of individual components, such as the various PAHs but also the dioxins and PCB's, it is not possible to state a regulatory limit in terms of the total weight of the component chemicals. In the case of PAHs the regulatory and classifying agencies have chosen the weight of the benzo(a)pyrene, a human carcinogen, as the representative PAH to base the permitted level on. Thus the EU and TRGS limits should be1-5 micrograms of benzo(a)pyrene and 50mg/kg of benzo(a)pyrene respectively."
5. Dr Crank and Dr Kenyon's joint report of 23 April 2015 recorded their agreement as to the following propositions: "1. Some polycyclic aromatic hydrocarbons (PAHs) are classified by the International Agency for Research on Cancer (IARC) as human carcinogens while other PAHs are not so classified. The IARC classifies benzo(a)pyrene (BaP) in Group 1, carcinogenic to humans, while other PAHs are in Group 2A, probably carcinogenic, and Group 2B, possibly carcinogenic. 2. Samples from the dark stained area of the top of the Welsh dresser were shown to be contaminated with high levels of PAHs. The highest concentration of the sum of 16 PAHs being 11,997mg/kg which included 54mg/kg of BaP. 3. A sample from the bottom of the Welsh dresser contained only a very low concentration of PAHs and no detectable concentration of BaP. 4. There is an extremely low possibility that PAHs could migrate out of the top of the Welsh dresser through the air or by contact with other furnishing. 5. Dr Crank concedes that he made an error in interpreting Technical Regulation for Classification of Hazardous Substances 551 as referring to '50mg/kg of PAHs' instead of the correct value of '50mg/kg of benzo(a)pyrene'. Correction of the calculations following this error means that the Welsh dresser would not be classified as a carcinogenic substance according to TRG 551. However, analysis of another sample from a dark stained area of the top of the Welsh dresser gave a result of 11,997mg/kg of PAHs of which 54mg/kg was BaP (Toxikos report Table 21). This result of 54mg/kg just exceeds the value of 50mg/kg of BaP given in TRG 551 for classification as a carcinogenic substance. 6. That exposure to chemical substances in the house at Stahringen, Germany would be broadly the same or similar to the type and concentrations of chemicals encountered in everyday life (except for Bap - see Issues not agreed). 7. It was agreed that persons extremely sensitive to chemicals could react to any chemical, at very low concentrations, that a 'normally sensitive' person would not react to. The photographs of the Stahringen house showed many chemicals including solvents, glues and domestic chemicals in the house."
6. They recorded their disagreements as follows: "8. Health impact of any contamination with PAHs from the Welsh dresser. Dr Crank believes that a person making skin contact with the top of the Welsh dresser could, experience a slight contamination with PAHs sufficient to cause a reaction. Such a reaction could be adverse effect [sic] on the skin such as a rash. Dr Kenyon believes that it is extremely unlikely that any infrequent skin contact with the top of the Welsh dresser would cause a skin reaction or other adverse health effect. It was noted in Table 1 of the Toxikos report that the Larsens' associated various items of furniture, including the bottom part of the Welsh dresser, and especially sleeping in the bedroom with [sic] triggering their symptoms. The contaminated upper part of the Welsh dresser was not in the vicinity of these items or in the bedroom. 9. Long term health effects due to PAHs contamination. Dr Crank maintains his opinion that presence of PAHs in the Larsens' possessions may cause longer term health effects in persons known to be susceptible to chemicals. Dr Crank believes that exposure to PAHs from the Welsh dresser would be higher than experienced in everyday life. Dr Kenyon maintains his view that the presence of the top of the Welsh dresser would not constitute any risk to health, related to PAHs exposure, of people living in the Stahringen house. Chemical analysis of many samples of furniture and books in the house showed only very low concentrations of PAHs, consistent with background environmental levels found on the exterior barn wall. Dr Kenyon believes that exposure to PAHs from diet and respiration of particulates would far exceed the level of PAHs intake related to infrequent contact with the Welsh dresser. 10. Contamination of the Stahringen house and items within the house. Dr Crank believes that, based on analytical results for PAHs found in items within the house, it would be necessary to consult the current German regulations for PAHs to determine the possible need for decontamination of the house. Dr Kenyon believes that there is no possibility that PAHs from the top of the Welsh dresser contaminated any items within the house or structure of the house. No detectable level of PAHs was found on the books analysed. The very low concentrations of PAHs on furniture items did not contain any detectable concentration of BaP. The low level PAHs on items did not reflect the distribution of specific PAHs found on the contaminated top of the Welsh dresser but were similar to those found on the exterior barn wall. Therefore, in my opinion, there is no need to decontaminate any item or to demolish the Stahringen house."

Dr Crank and Dr Kenyon's concurrent oral evidence

1. The experts agreed that, at least if the Welsh dresser were excluded from consideration, the testing of which they had been made aware did not reveal any contamination in the appellants' furniture or other goods, or in their house (Transcript p 328).
2. Dr Kenyon considered that there was "an extremely low possibility of that which was found on the top of the Welsh dresser causing any cross-contamination in any other part of the house", whilst Dr Crank agreed that it was unlikely that that would have occurred (Transcript p 330).
3. Both experts agreed that "the only possibility of Mr and Mrs Larsen suffering any ill adverse health effects as a result of anything in that house [was] as a result of actual contact with the top of the Welsh dresser" (Transcript p 335). Dr Crank added that that might not be the case if "other articles were … placed on top of the Welsh dresser and then handled" (ibid). However, Dr Crank did not assess the chance of transfer of contamination from the dresser to another inanimate object as more than a possibility (Transcript p 336).

Conclusions

1. Dr Crank's evidence on this topic, at its highest, merely suggested that having physical contact with the tar-like substance, or contact with an article that had itself been in contact with the substance, might have caused a person to have an adverse health reaction. There was no evidence of an article being placed on the dresser which would have rendered the latter alternative relevant. Notably, Dr Kenyon rejected both alternatives as being a possible cause of ill- health.
2. Even if Dr Crank's evidence were to be accepted in preference to that of Dr Kenyon, it would not support the appellants' case on liability because, as noted by the primary judge, "Mrs Larsen never had direct contact with the substance and Mr Larsen's only direct contact was in 2008, when he cut off a piece of the dresser which he sent away for testing" (Judgment [137]). As to the latter, her Honour observed that Mr Larsen's health problems had in fact commenced in 2004, well before the 2008 contact (Judgment [138] and see [205]-[206]). Thus the 2008 contact could not have been a cause of his ill-health. Mrs Larsen gave evidence that it was in 2004 that Mr Larsen commenced having breathing difficulties, which worsened over time, and, at least by 2007, became associated with other problems such as dizziness and sweating at night (witness statement [26] and [48]-[51]). Mr Larsen also gave evidence that he had severe health problems in 2007. On 22 April 2008, he concluded that the appellants' health problems were related to the Welsh dresser (ibid, [83]) and it was thereafter that he sawed off a piece of the dresser for testing. On her Honour's findings, this was the first and only occasion upon which he came into contact with the dresser.
3. Mr Larsen gave evidence at first instance (but only, for the first time in cross-examination) that he had had contact with the dresser in 2006 when he had sanded it in an attempt to remove the foreign substance from its top. The primary judge rejected that evidence ([126]-[137]). On appeal, the appellants were not able to identify any proper basis for this Court to reject this finding.
4. These findings as to contact with the substance on the top of the dresser were credit-based findings that were not the subject of any arguable basis for challenge on appeal (see [7] above). When taken in conjunction with the expert evidence, they require, subject to the new evidence issue discussed below, that the appeal be dismissed on the basis that the appellants did not prove that the relevant substance appeared on the dresser whilst it was in the possession of the respondent or that it caused their health problems.
5. Before concluding on this topic I should refer to letters in evidence dated 24 October and 8 November 2012 from the German Department for Waste Law and Occupational Health and Safety to the appellants. The second of these said that "[d]ue to their high PAH contamination, the contaminated items stored at the property are unequivocally to be classified as 'dangerous waste which has to be disposed of'". For good reason, her Honour did not treat these letters as significant as the basis upon which this view was expressed was not clear, other than that it appeared to have been information that emanated from the appellants. Nor was there was evidence that the views of the experts who gave evidence before her Honour had been communicated to the German Department (Judgment [240]-[243]). The absence of a reasoned basis for the conclusion and the unavailability of the author or authors for cross-examination rendered the documents of no significant weight.

THE NEW EVIDENCE SOUGHT TO BE TENDERED

1. In his affidavit of 12 August 2016, Mr Larsen described the documents sought to be tendered as follows: "a. Extracts from Respondent's toxicology report which was not relied on by the Respondent in the lower Court observed 'a tar-like smell was evident' in 2013 on the Welsh dresser. b. Extracts from ETC/ACC Technical Paper 2008/12 December 2008, part 3.7, Benzo(a)pyrene. This contradicts a number of assertions made by Dr Kenyon. c. Report on Uta Larsen by Dr Li, Dept of Oncology, University Hospital of Sthn China, regarding her ongoing treatment for metastasis skin cancers and her sensitivity to light treatment etc. in August 2015. d. Post trial photographs of Applicants' serious ongoing skin cancers and lesions."
2. The first document comprised extracts from the report of Mr Scobie referred to in [11] above. The extracts did not include his presently relevant conclusions which other evidence indicates were strongly favourable to the case of the respondent and not to that of the appellants (see [12] above). The selection of the extracts therefore amounted to the cherrypicking of limited portions of an apparently otherwise unfavourable report. The extracts would not have admissible at first instance, at least because Mr Scobie was not available for cross-examination (see [10] above). A fortiori they are not able to be tendered on appeal. Moreover, the appellants have not satisfactorily explained why they were not tendered at first instance. Nor have they demonstrated why they would have been highly probative if admitted (see Supreme Court Act 1970 (NSW), s 75A(8) requiring "special grounds" and Akins v National Australia Bank (1994) 34 NSWLR 155 at 160). The appellants' attempt at explanation was based on their claim that they had been denied procedural fairness as a result of the primary judge permitting the respondent to rely upon the report of Dr Kenyon. However, I have rejected the appellants' contentions in that regard (see [12] above).
3. The second document also pre-dates the hearing at first instance. No "special grounds" that would justify its admission on appeal have been identified. The appellants clearly gave considerable attention over a long period of time to the technical aspects of their case and had the expert advice of Dr Crank to assist them. It would conflict with the principle of finality and s 75A(8) to admit this document on appeal.
4. The third and fourth documents are post-hearing documents relating to the appellants' ill-health. The application to tender them on appeal should be rejected at least for the reason that the appellants' continuing health problems and treatment are not, in light of the conclusions I have reached on liability, of relevance to the determination of this appeal.
5. I add reference here to the appellants' contention, through a ground of appeal, that the primary judge erred in not allowing them to cross-examine each other. The appellants did not refer this Court to any point in the transcript where the primary judge is recorded as having denied the appellants that opportunity or of any complaint that the appellants made in that respect. To the contrary, it appears that throughout the hearing her Honour was considerate of the appellants' status as unrepresented litigants and did her utmost to ensure that it proceeded in a fashion that was fair to them.

ORDERS

1. For the reasons that I have given, the following orders should be made: 1. Dismiss the appellants' notice of motion filed on 12 July 2016 seeking leave to adduce further evidence on appeal. 2. Direct that the appellants' application for leave to appeal be treated as an appeal as of right. 3. Dismiss the appeal. 4. Order the appellants to pay the respondent's costs of the appeal.

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