Morrison v Peacock and Roslyndale Shipping Company Pty Ltd

Land and Environment Court (NSW)|1999-08-06|Before: Pearlman J

Introduction 1 to 6 The incident 7 to 10 The statutory defence 11 to 13 The first element of the defence Did the oil escape from the ship in consequence of the damage to the ship or its equipment? 14 to 19 The second element of the defence Was such damage not "intentional damage" according to the definition of that expression contained in s 8(3) of the Act? 20 to 43 The third element of the defence Were all reasonable precautions taken after the occurrence of the damage or the discovery of the discharge for the purpose of preventing or minimising the escape of oil? 44 to 48 Conclusion 49 to 51

IN THE LAND AND 50006 of 1998 and 50007 of 1998 ENVIRONMENT COURT Pearlman J OF NEW SOUTH WALES 6 August 1999

No 50007 of 1998 ANTHONY PATRICK MORRISON Prosecutor v ROSLYNDALE SHIPPING COMPANY PTY LTD Defendant JUDGMENT

In these class 5 proceedings, both defendants have pleaded not guilty to an offence against the Marine Pollution Act 1987 ("the Act"). The respective charges allege that on 1 December 1996, in The Lagoon at Lord Howe Island, a discharge of oil occurred from the vessel Sitka II ("the ship") into waters in contravention of s 8(1) of the Act. The defendant, Captain Harold Peacock, was the master of the ship, and the other defendant, Roslyndale Shipping Company Pty Ltd ("Roslyndale"), was the owner of the ship.

Section 8(1) of the Act relevantly provides: 8(1) Subject to subsections (2) and (4), if any discharge of oil or of an oily mixture occurs from a ship into State waters, the master and the owner of the ship … are each guilty of an offence …

The defendants claim a defence to the charge under s 8(2)(b), which provides that s 8(1) does not apply to the discharge of oil or an oily mixture from a ship: 8(2)(b) if the oil or oily mixture, as the case may be, escaped from the ship in consequence of damage, other than intentional damage, to the ship or its equipment, and all reasonable precautions were taken after the occurrence of the damage or the discovery of the discharge for the purpose of preventing or minimising the escape of oil or oily mixture, as the case may be.

The expression "intentional damage" is defined in s 8(3) as follows: 8(3) For the purposes of subsection (2), damage to a ship or its equipment shall be taken to be intentional damage if, and only if, the damage arose in circumstances in which the master or owner of the ship: (a) acted with intent to cause the damage; or (b) acted recklessly and with knowledge that damage would probably result.

Section 8(6) provides as follows: 8(6) In proceedings for an offence against subsection (1) in relation to a ship, it is sufficient for the prosecution to allege and prove that a discharge of oil or of an oily mixture occurred from the ship into State waters, but it is a defence if it is proved that, by virtue of subsection (2) or (4), subsection (1) does not apply in relation to the discharge.

There is no issue between the parties as to the jurisdiction of the Court. "State waters" are defined in s 3(1) of the Act as meaning, amongst other things, the territorial sea adjacent to the State. By virtue of s 21(1) of the Interpretation Act 1987, "the State" means the State of New South Wales, and s 4 of the Constitution Act 1902 defines the boundaries of New South Wales as including Lord Howe Island.

On 1 December 1996, the ship was tied up to the jetty at Lord Howe Island, unloading a cargo of road base bags, utilising for that purpose a crane on the ship. At about 11.45 am, a hydraulic hose fitted to the crane ruptured, causing hydraulic oil to discharge under pressure.

An amount of 15 litres of oil escaped. Some of it discharged on to the deck of the vessel, but about 5 litres of the oil escaped over the ship's side into the water.

The first mate, Mr M Harrison, shut down the hydraulic pump, and notified the authorities of the spill. With the assistance of the ship's crew, a clean up operation was carried out by Mr C M Wilson, the port operations manager, Mr C A Wilson and Mr K B Wilson of the marine administration board, Ms P Skeggs, who was employed by the environmental section of the Lord Howe Island Board, and Mr D Hiscox. Mr C M Wilson estimated that the clean up operation took approximately two hours.

These findings satisfy me beyond reasonable doubt that a discharge of oil occurred from the ship into State waters. In terms of s 8(6) of the Act, that is sufficient for the prosecution to have proved. It is necessary, then, to consider whether the defendants have proved that s 8(1) does not apply by virtue of s 8(2)(b).

The defendants rely upon the defence provided in s 8(2)(b) of the Act, which I have earlier set out. The statutory defence requires the defendants to prove on the balance of probabilities all of the following elements of the defence: (i) the oil escaped from the ship in consequence of damage to the ship or its equipment;

(ii) such damage was not " intentional damage" according to the definition of that expression contained in s 8(3) of the Act;

(iii) all reasonable precautions were taken after the occurrence of the damage or the discovery of the discharge for the purpose of preventing or minimising the escape of oil. 12. I have preferred to treat the element of the defence which I have noted in par (iii) as one element, requiring proof of reasonable precautions being taken either after the discovery of the damage or after the discovery of the discharge. In Morrison v ANL and Ors (1996) 91 LGERA 437 at 443, Bignold J used the conjunctive "and" rather than "or" and thus separated this element of the defence into two distinct elements. Section 8(2)(b) uses "or", and hence I take the view that treating this as one element of the defence more readily accords with the language of the section.

The first element of the defence Did the oil escape from the ship in consequence of the damage to the ship or its equipment?

The crane was described as an HMF marine crane, manufactured by Grues Marine of France. It was located on the port side of the ship, bolted to a steel plinth. The plinth contained four access holes, one on each side, and a round hole at the top, over which the crane was mounted. Eight hydraulic hoses passed from the control mechanism through the forward access hole of the plinth and up through the round hole into the casing of the crane.

Captain Peacock gave the following evidence as to his observations of the damage to one of the hydraulic hoses inside the crane following the discharge of oil: … I inspected the crane with the Chief Engineer Mr Michael Warne. It was not apparent to start with, from where the hydraulic oil had escaped. None of the external hydraulic hoses were damaged. None of the internal hydraulic hoses were visible. The internal hoses could not be seen because they were encased in the crane casing and plinth. I concluded one of the high-pressure hydraulic hoses located within the plinth of the crane must have ruptured because I observed the source of the leak to be internal.

I am satisfied on the balance of probabilities that the oil escaped from the ship in consequence of the rupture of one of the hydraulic hoses which were attached to the crane through the plinth and the crane casing.

However, Mr Hill, appearing for the prosecutor, submitted that the hydraulic hose ruptured through wear and tear, and that the reference to "damage" in s 8(2)(b) does not, on its proper construction, include fair wear and tear.

That proposition receives support from the decision in Morrison v Spliethoffs Bevrachtingscantoor BV and Anor (1996) 91 LGERA 318. In that case, Bannon J, citing English authorities, took the view (at p 320) that "… when s 8(2) speaks of the 'occurrence of the damage' it is not including 'fair wear and tear' within the concept of damage …" . However, the proposition was firmly rejected in the earlier decision of Morrison v Dilmun Navigation Co Pty Ltd (1995) 78 A Crim R 576 where Bignold J held that the word "damage" appearing in s 8(2)(b) in the phrase "damage, other than intentional damage, to the ship or its equipment" should not be read down from its ordinary meaning or given a restrictive meaning. His Honour adhered to that view in Morrison v ANL , declining to follow Bannon J. His Honour's reasoning was based on a purposive interpretation of the Act, holding (at p 581 of Dilmun ) that "… there is no justification for reading down the ordinary meaning of the various elements of the statutory defence, for to do so, would be contrary to the deliberate legislative action of providing statutory defences to the strict liability imposed upon owners and masters of ships from which oil discharges occur…" . With respect, I adopt his Honour's reasoning, and I approach these proceedings upon the basis that the word "damage" in s 8 of the Act includes fair wear and tear.

Accordingly, this element of the defence has been made out by the defendants.

The second element of the defence Was such damage not "intentional damage" according to the definition of that expression contained in s 8(3) of the Act?

This element of the defence constituted the most critical aspect of this case, and the issue upon which the major part of the evidence was directed. In order to succeed in establishing this element of the defence, the defendants bear the onus of proof to discharge a negative, that is, that the relevant damage was not "intentional damage" as defined in s 8(3). There was no suggestion that they "… acted with intent to cause the damage …" and accordingly the defendants are required to establish, within the second limb of s 8(3) and on the balance of probabilities, that they did not, in the circumstances, act "recklessly and with knowledge that damage would probably result" (cf Morrison v ANL at 445).

The relevant background facts are these. The crane was secondhand. Mr R A Roberts, who was in the employ of Lord Howe Island Shipping and had sailed as a relief engineer on the ship, made various inquiries about purchasing a crane for the ship and he found the crane in Brisbane. He consulted with Mr B Pettit, a marine surveyor with the classification society Bureau Veritas, in relation to the specifications of the crane and its condition. He then formed the view that it might be suitable for the ship. He next engaged Gateway Hydraulics Pty Ltd, a company specialising in marine hydraulics, to recondition the crane for use on the ship. It appears from the invoice delivered by that company that it inspected the crane and replaced some parts, including some of the hose assembly. The crane was then taken to Keppel Cairncross Shipyard Ltd at Bulimba in Queensland, where it was blasted back to bare metal and repainted with marine grade anti-corrosion paint.

The next step was to transport the crane to Auckland as cargo on the ship. A company specialising in marine hydraulic engineering, Total Hydraulic Services Pty Ltd, was engaged in Auckland to assemble the crane and fit it to the ship. The invoice for that company's work describes the work carried out as follows: Check mounting requirements and position crane. Mounted crane to deck. Removed power unit and cleaned out tank. Replaced filter element and tested. Positioned power unit and ran hydraulic lines. All connections and test ran ok.

Captain Peacock was present when Total Hydraulics assembled the crane and fitted it to the ship. He described the process as first involving the welding of the plinth to the deck. Then fixed hydraulic lines were run from the forecastle (where the oil reservoir and pump for the crane were housed). The crane was then lifted over the plinth, the internal hydraulic hoses were connected, and the crane was ultimately secured by bolts on to the plinth.

On 10 June 1996, Mr A Gourlay, who was a marine surveyor for Bureau Veritas in Auckland, tested the operation of the crane. Both Mr Roberts and Captain Peacock were present when this was done. The testing was carried out as part of the annual inspection of the ship. According to Captain Peacock's evidence, the test took two hours, and involved ensuring that the crane was able to operate at full radius with rated loads, and also involved overload testing to ensure safety and performance. Mr Gourlay issued a Bureau Veritas certificate. So far as is presently relevant, the certificate attested to a thorough examination of the crane, and its testing as satisfactory. It outlined the test loads, and certified that: … the above machinery, together with its accessory gear was tested by a competent person in the manner set forth on the reverse side of this certificate; that a careful examination of the said machinery and gear by a competent person after the test showed that it had withstood the proof load without failure or permanent deformation…

So far as concerns the offence under s 8(1), the relevant damage was the rupture of the hose because that is the damage which caused the discharge of oil. But for the purpose of considering the defence under s 8(2)(b), it is relevant to consider the cause of that damage, that is, what caused the rupture of the hose. Mr K C Williamson, who is a marine engineer, gave evidence on this aspect for the defendants. I found Mr Williamson to be a frank and reliable witness, and I place considerable weight upon the expert opinion which he furnished.

Mr Williamson's opinion was that the hose failed because of abrasion and chafing at the base of the steel sleeve in the crane column near the point where the crane sat at the top of the plinth. In the course of his investigation (which took place some time after the incident) Mr Williamson was able to observe the crane in a dismantled state. He noted that the base of the steel sleeve was very heavily corroded and that the radius was very rough. At the base of the sleeve, according to Mr Williamson, the column of hoses was able to turn in excess of 400 degrees, which resulted in a sawing motion of all the hoses at the point where the sleeve was corroded and rough. The abrasion and chafing could be seen on the eight hoses at that point when they were inspected after having been removed from the crane casing.

That point was not the only place where the hoses appeared to have suffered abrasion and chafing. Mr Williamson thought that there was abrasion and chafing at the point where the hoses entered the plinth through the forward access hole. But, in his opinion, that was not the place at which the hose had ruptured; rather, the hose ruptured further up, at the base of the sleeve in the crane casing.

The findings I have made in relation to the acquisition, assembly and fitting of the crane and Mr Williamson's evidence as to the cause of the rupture of the hose, would on the face of it be sufficient to establish that neither of the defendants acted recklessly and with knowledge that damage would probably result. However, the prosecution raised a number of matters in an endeavour to cast doubt on such a finding. Those matters derived principally from the evidence of Mr P E Burge, a marine consultant.

The first matter raised by Mr Burge was that the access hole in the plinth through which the hoses passed was rough and uneven, and was likely to cause abrasion and chafing, which Mr Williamson found did in fact occur at that point.. Hence, in Mr Burge's opinion, the fact that a hose failed was foreseeable and preventable. This evidence does not coincide with Mr Williamson's opinion that the hose ruptured at the point where the hoses entered the steel sleeve of the crane casing, and, since I accept Mr Williamson's version, it does not displace a conclusion that there was no "intentional damage" .

Mr Burge's second matter was his assertion that the abrading and chafing at the point where the hoses entered the plinth through the access hole should have put the defendants upon notice that the hoses were poorly installed, and should have provoked them into a more thorough examination of the state of the hoses, but they failed to do so. The third matter raised by Mr Burge was his further assertion that the defendants abrogated responsibility for effective and ongoing maintenance of the ship's equipment by relying on the certification from Bureau Veritas, which was, rather, designed only to show that, at the time of survey, the ship was in conformity with the classification rules. Both these matters, that is, the defendants' failure to examine the hoses internally in the plinth and their reliance on the Bureau Veritas tests alone, were, in the prosecutor's submission, a "reckless" act within the meaning of s 8(3).

So far as I am aware, there have been no decided cases on the proper construction of the phrase "recklessly and with knowledge that damage would probably result" as it appears in the Act, but an identical phrase is used in article 25 of the Warsaw Convention (which relates to transport by air), and the phrase there used has been the subject of two decisions. In Goldman v Thai Airways International Ltd (1983) 3 All ER 693 at 699, it was held by Eveleigh LJ (with whom O'Connor and Purchas LJJ agreed), that the test propounded in the phrase was subjective, and that the phrase must be considered as a whole, since the doing of the act to which it relates is qualified not only by the adverb "recklessly" but also by the adverbial phrase "with knowledge that damage would probably result" . That decision was followed by Rogers J in SS Pharmaceutical Co Ltd and Anor v Qantas Airways Ltd (1988) 22 NSWLR 734 but with very little discussion, although his Honour quoted with approval at p 750 the following passage from Shawcross and Beaumont (vol II at 132): "It is undeniable that the actor himself must actually have knowledge that damage would probably result. It is not enough to show that some other person had that knowledge, or that he would have had it if only he had applied his mind to the matter".

Mr Hill cited two other authorities on this point, namely, R v Caldwell (1982) AC 341 and R v Lawrence (1982) AC 510, but both those cases dealt with the word "recklessly" in an entirely different concatenation of words, and I do not find them of any assistance, accepting, as I do with respect, the construction of the identical phrase as propounded by Eveleigh LJ.

Applying the construction adopted in Goldman v Thai Airways in the light of the facts of this case, it will be seen that s 8(3) requires the Court to find " intentional damage" if, and only if, the damage to the ship's equipment, that is, the rupture of the hydraulic hose, arose in circumstances where either of the defendants committed an act, that is, the act of using the crane, recklessly and with knowledge that a hydraulic hose would probably rupture.

I am satisfied on the balance of probabilities that neither of the defendants had actual knowledge that the hydraulic hose would probably rupture when they used the crane. There are a number of findings upon which I base this conclusion. First, Roslyndale engaged experts in Australia to carry out work on the crane, experts in Auckland to assemble and fit it, and an expert from Bureau Veritas to test its operation, and Captain Peacock knew it had done so. It was reasonable in those circumstances for both the defendants to believe that the crane and its components would operate without mishap. Secondly, the crane was installed only six months prior to the incident, but had been used during that period without damage. Captain Peacock gave evidence, which I accept, that in that period the crane was operated during approximately six trips at an average of eight to ten hours per trip, and Captain D M Pyett, who gave evidence for the defendants, calculated from the ship's log book that the crane had operated during that period for 60.5 hours. That length of operation without mishap was another factor which supports a belief by both the defendants that the crane and its components were working normally. Thirdly, visual inspection of the hoses at the point where the hose ruptured was, as Mr Williamson frankly conceded, a physical possibility by using a torch and peering up into the plinth, but was not certain to reveal the abrasion and chafing of the one hose which led to the actual rupture because eight hoses were located in that position.

None of those matters justify an inference that either of the defendants had actual knowledge that the hydraulic hose would probably rupture when the crane was being used. To the contrary, they each had reason to believe that no such thing would occur.

Although I have found that the defendants were not acting recklessly and with knowledge that damage would probably result, I deal with two further matters which were raised by the prosecutor in order to cast doubt upon such a finding. First, the prosecutor alleged that there were defects in the crane's operation which were known to the defendants prior to its use to unload cargo at Lord Howe Island, and they used the crane despite that knowledge. Secondly, the prosecutor alleged that the defendants operated the crane in the knowledge that there was, in contravention of industry standards, insufficient bunding and other precautionary measures in place to prevent any spill or escape of oil into waters.

As to the first matter, there was in evidence a copy of a fax from Commander I J Bofinger to Mr D Pratt (whom Commander Bofinger stated was with "W" Islands Line in New Zealand) which referred to the ship and contained the statement: "Please also advise Total Hydraulics that a hydraulic line has fractured under the plinth of the crane and will require repair on arrival in Auckland". The fax is dated "09/23/96" and accordingly it was asserted by the prosecutor that there had been damage to a hydraulic hose prior to the spill of oil. However, the defendants called Commander Bofinger, who explained that there was an error in the fax caused by the computer he was using at the time. He furnished a fax transmission report dated 3 December 1996 which he stated was the date upon which he sent the fax, and he verified that date by reference to his personal diary. Commander Bofinger's evidence was not displaced by cross examination, and I accept that the fax was sent subsequent to the discharge of oil the subject of these proceedings and not beforehand.

Also in connection with the first matter, some minor problems with the crane were identified as occurring before the incident in question. In a fax sent by Mr Roberts on 3 December 1996 (after the date on which the discharge of oil occurred) to "Irvines", apparently in relation to the crane, he noted, first, that some chrome pit marks were tearing the seals and causing oils to leak on some of the crane's rams, and also, that there had been a second leak of oil from the crane. He further noted that both these defects had been examined by hydraulic experts, the first being inspected by Shannon Bros and the second by a Mr Barnaby. There also appears to have been a further problem with the crane, which was noted in the ship's log as having occurred on 21 June 1996. Captain Peacock testified that an arm of the crane had shifted position and caused some minor damage to the outside hydraulic hoses where it touched them, and the problem was fixed while the ship was anchored during bad weather.

The prosecutor's contention is that knowledge of these problems with the crane should have alerted the defendants to its deficiencies and the possibility of damage occurring, yet the defendants continued to operate the crane. I am satisfied that there had been minor problems with the crane's operation prior to the discharge occurring, but none of those problems related to the damage which actually caused the discharge, that is, the rupture of the hydraulic hose at the base of the sleeve of the crane. Accordingly I am not prepared to draw an inference from any of these problems that either of the defendants had actual knowledge that the rupture to the hydraulic hose would probably result when they used the crane.

The second matter relates to industry practice. Mr Burge's evidence was that the crane should have been fitted with "internal save-all trays around pumps, pipe and hose connections and other vulnerable components", and that the two drain holes at the base of the plinth should have been plugged whilst the crane was in operation. However, Captain Peacock stated that he had never seen or heard of a practice of installing save-alls or plugging holes or drains. Mr Williamson's evidence indicates that neither of these procedures is an accepted industry standard. In his report, Mr Williamson stated that "[I]t is not the practice of the industry for dry cargo vessels to fit scupper plugs for general dry cargo operations. Nor is it the practice of the industry for dry cargo ships to plug drainage holes such as those found in the crane pedestal or along the vessel's sheerstrake. This is in contrast to the industry practice on board tankers where all scuppers and holes should be plugged for cargo operations because of the nature of the cargo being liquid and potentially dangerous" . Furthermore, he produced photographs of cranes installed on several ships at anchor in Cairns, and he noted that none of them had save-alls or bunding installed.

41 . It was suggested to Mr Williamson in cross-examination, by reference to those photographs, that the hydraulic hoses on all of the cranes depicted in them were protected from abrasion and chafing by clamping and protective covering, and several examples of protective covering were tendered in evidence. Mr Williamson's response, however, was that the damage which occurred arose out of the original design of the crane. He conceded that the hydraulic hoses on the crane could have been re-routed and covered in protective devices, but that these were measures derived from hindsight.

42 . I am satisfied that the defendants were not operating the crane contrary to industry standards or practices, and that neither of them acted recklessly and with knowledge that damage would probably result in failing to install save-alls, plug holes or attach protective devices.

43 . I should mention at this point the issue of the blue paint. The eight hoses which went through the plinth to the crane were tendered in evidence (although one of those tendered was in fact only half of the hose). Each contained a faint marking of blue spray-paint. Six of the hoses bear the mark "HMF Denmark" and two bear the mark "Duffield". The invoice from Total Hydraulics in Auckland indicated that hoses and fittings were supplied at a cost of $1207.46. It was contended by Mr Hill that these facts together gave rise to a doubt as to whether two or more new hoses were fitted in Auckland or whether all the hoses were fitted in Brisbane before the crane was re-painted by Keppel Cairncross. However, I fail to see that this contention has any bearing on any issue in the case, and, since Mr Hill fairly conceded as much when I put that to him during the course of argument, I put the issue aside as irrelevant.

The third element of the defence Were all reasonable precautions taken after the occurrence of the damage or the discovery of the discharge for the purpose of preventing or minimising the escape of oil?

I infer from the nature of the damage (that is, the rupture of a hydraulic hose) that the damage and the discharge happened simultaneously. Furthermore, I infer from the amount of the discharge (15 litres) and the fact that the crane was operating at the time, that the discharge was discovered immediately upon its occurring.

The crew took three steps after the discovery of the discharge. First, as disclosed in a report furnished to the port operations manager, Mr C M Wilson, the first mate, Mr Harrison, went at once to the forecastle and shut down the hydraulic pump. He estimated that it took him about 20 seconds to do so. Secondly, as disclosed in that report, sand and rags were placed at the base of the crane to contain the spillage. Thirdly, Mr Harrison rang the shipping agent on shore in order to alert Captain Peacock who was at the shipping agent's office when the discharge occurred.

Captain Peacock informed Ms Skeggs of the spill, and she alerted Mr C M Wilson and Mr Hiscox. As I have earlier set out, a clean up operation immediately ensued, and the crew assisted the port officers in containing the discharge.

There is a conflict in the evidence about whether the crew of the ship placed sand and rags at the base of the crane to contain the discharge. Mr C M Wilson stated that he saw no oil spill recovery equipment on the ship, and, in giving oral evidence, he said that sand was being collected from the beach for that purpose. On the other hand, in his report, Mr Harrison stated that "sand and rags provided at the cranes base contained the spillage on deck". Captain Peacock said that the ship carried bags and pads of absorbent material, and also kept on board a quantity of rags, sand and sawdust. He stated that, upon his return to the ship from the shore, he observed that the crew had plugged the scuppers and placed absorbent material over the discharge on the deck. I prefer Captain Peacock's version. He was the master of the ship and more likely to know with accuracy what recovery materials were carried on board, and more likely to have been concerned that the spill was contained on the deck. His observation of the placing of absorbent material over the discharge on deck is, moreover, corroborated by Mr Harrison's report.

I am satisfied, on the balance of probabilities, that all reasonable precautions were taken after the occurrence of the damage or the discovery of the discharge for the purpose of preventing or minimising the escape of oil.

It follows, from the findings that I have made, that the defendants have discharged their onus of proving all the elements of the defence specified in s 8(2)(b) of the Act, and that accordingly they are each entitled to be acquitted of the charge against them, and the charges should be dismissed.

However, I propose to defer the making of final orders, in order to permit the parties to address the Court on the question of costs, and in order for the prosecution to consider its position in terms of s 5AE(1) of the Criminal Appeal Act 1912.

51 . I grant leave to the parties to approach the Registrar to obtain a date for the Court to deal with these matters.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Land and Environment Court of New South Wales CITATION: Morrison v Peacock and Roslyndale Shipping Company Pty Ltd [1999] NSWLEC 182

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