Preston v Harbour Pacific Underwriting Management Pty Limited

Defamation Act 1974 LEGISLATION CITED: Supreme Court Act UCPR Pt 51 r 51

Commonwealth Bank of Australia v Quade [1991] HCA 61, 178 CLR 134 Coulton v Holcombe (1986) 162 CLR 1 McDonald v McDonald [1965] HCA 45, 113 CLR 529 CASES CITED: Myers v Elman [1940] AC 282 Orr v Holmes [1948] HCA 16, 76 CLR 632 SZFDE v Minister for Immigration and Citizenship [2007] HCA 35, 232 CLR 189 Wollongong Corporation v Cowan [1955] HCA 16, 93 CLR 435

Alexander Preston - Appellant Harbour Pacific Underwriting Management P/L - 1st Respondent Terence Sean McCabe - 2nd Respondent PARTIES: Bruce Pausey - 3rd Respondent Christopher Donald Wood - 4th Respondent Michael Maher Associates P/L - 5th Respondent Michael Maher - 6th Respondent

B A Coles QC; J Anderson - Appellant COUNSEL: D R Sibtain; C Amato - 1st Respondent S Wheelhouse SC - 2nd, 3rd & 4th Respondents D Campbell SC; S McCarthy - 5th & 6th Respondents

Jackson Smith - Appellant SOLICITORS: Mallesons Stephen Jaques - 1st Respondent Middletons - 2nd, 3rd & 4th Respondents Moray & Agnew - 5th & 6th Respondents

LOWER COURT JURISDICTION: Supreme Court - Common Law Division

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40092/06 SC 20900/01

BEAZLEY JA MCCOLL JA HANDLEY AJA

ALEXANDER PRESTON v HARBOUR PACIFIC UNDERWRITING MANAGEMENT PTY LIMITED & ORS

NEW TRIAL - Jury - fresh evidence - application not within Supreme Court Act s 75A. NEW TRIAL - fresh evidence - discovery of documents - appellant and some defendants failed to discover same documents - such default not ground for new trial - Commonwealth Bank of Australia v Quade distinguished - undiscovered documents not fresh evidence. HEAD NOTE

In 2001 the appellant brought an action for slander allegedly committed during a telephone conversation in late 1997 or early 1998. The conversation was between an insurance investigator enquiring into a fire at the premises of the appellant's company, and one of the appellant's business associates. On the s 7A trial in 2006 the jury found that the imputations complained of were not conveyed during the conversation. The appellant sought a new trial relying on the discovery of fresh evidence. This comprised a second and longer note of the telephone conversation allegedly made by the business associate, and a bundle of documents allegedly sent by the investigator to the business associate after the conversation. A photocopy of the former, which was challenged by the respondents, had been located, after the fire, in a file of the appellant's solicitors relating to the fire claim. A copy of the bundle of documents was found in a file that had been in the appellant's possession for an indeterminate time before being handed over in 2003 to the purchaser of one of the appellant's businesses where it was located after the trial. HELD: (1) The application was governed by s 102 of the Supreme Court Act and UCPR Pt 51 r 51 and not by s 75A of the Act; (2) The appellant had failed to establish that the new evidence could not have been discovered before the trial by the exercise of reasonable diligence; (3) The fifth and sixth defendants should have discovered the bundle of documents, but they were not shown to have been in the possession or power of the other defendants; (4) The appellant should also have located the longer note and the bundle of documents and formally discovered them before the trial; (5) Since the appellant and the fifth and sixth respondents had both failed to give proper discovery the principles in Commonwealth Bank of Australia v Quade 178 CLR 134 did not assist the appellant; (6) the appeal should be dismissed. ORDERS

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40092/06 SC 20900/01

BEAZLEY JA MCCOLL JA HANDLEY AJA

THURSDAY 23 OCTOBER 2008 ALEXANDER PRESTON v HARBOUR PACIFIC UNDERWRITING MANAGEMENT PTY LIMITED & ORS Judgment 1 BEAZLEY JA: I agree with Handley AJA. 2 McCOLL JA: I agree with Handley AJA. 3 HANDLEY AJA: This is an application by the unsuccessful plaintiff for a new trial of issues under s 7A of the Defamation Act 1974, tried before Bell J and a jury between 30 January and 6 February 2006. The application is based on the discovery of fresh evidence. The principles which this Court must apply where the case was tried with a jury continue to be governed by the common law. As Mr Coles QC for the appellant submitted, this application is not within s 75A of the Supreme Court Act but is within s 102 and UCPR Pt 51 r 51. 4 The appellant sued the defendants for slander allegedly uttered by Mr Maher, an insurance investigator, during a telephone conversation with Mr Short, a business associate of the appellant (the conversation). The third further amended statement of claim pleaded in para 4 that in or about March 1998 or alternatively in about September 1997 Mr Maher spoke and published the matter complained of to Mr Short. This was said to give rise to the following imputations: (a) The plaintiff made a fraudulent insurance claim; (b) The plaintiff committed arson; (c) The plaintiff caused the discharge of the sprinklers at his business as part of a dishonest plan to lodge a fraudulent insurance claim; (d) The plaintiff was 'broke'; (e) The plaintiff was so dishonest a person that Elizabeth Street Finance should not continue to offer him financial support; (f) The plaintiff, because he gambled all his money away at the casino, was in such desperate financial position that he was prepared to engage in serious criminal activity." 5 A list of questions was given to the jury for the purposes of their verdict, question 1 being whether the plaintiff had established that during the conversation Mr Maher had said the words complained of or words which did not differ in substance from them. On 6 February 2006, the jury answered that question in favour of the defendants and did not answer the other questions. 6 The jury had available to them a photocopy of an undated note in the handwriting of Mr Short about the conversation which became ex 1(D1). It did not include any reference to the more serious imputations relating to the fraudulent fire claim, arson, and the water damage caused by tampering with the sprinkler system.

7 The jury also had available to them a photocopy of a typewritten letter dated 20 March 1998 written by a solicitor, Mr Stewart Smith to Mr Short which became ex A. Mr Smith gave evidence that he was sitting on the opposite side of Mr Short's desk when Mr Short took a telephone call. He heard Mr Short's side of the conversation but did not see him make any note although there was an office computer between them. After the call had finished he and Mr Short discussed it. Ex A relevantly stated: "I have been thinking about the various conversations we have had over the past few weeks concerning your association with Alex Preston. It is very disturbing to me to hear from you that some insurance investigator has telephoned discussing with you suggestions that Alex was behind the incident which destroyed his printing business. I am very concerned about the suggestions that his claim for compensation is fraudulent. During our many discussions I have gained the impression from little things you have said during the past that in some way you have financed Alex and probably more likely his companies in his endeavours to get his photographing procedures into a marketable achievement. Consequently I feel the best advice in your interests is to cease having any association with Alex while the highly suggestive accusations are flowing around that Alex is involved in fraud or any incident leading to fraud." 8 There is no reference in the letter to Mr Smith being present during the conversation. 9 These two documents were the only written evidence about the conversation before the jury. 10 The evidence in support of the application includes an affidavit by the appellant dated 15 December 2006 which deposed to a conversation he had with Mr Short on 6 February 2006 later on the day the jury returned their verdict. The evidence also includes an affidavit by Mr Short of 29 May 2006 dealing with the same conversation. 11 On 6 February 2006 the two men met in a coffee shop in the building where Mr Short has his office. The appellant had with him a copy of a report dated 12 December 1997 prepared by Mr Maher addressed to McCabes the solicitors acting for the underwriters on the fire claim (the Maher report). At Mr Short's request the appellant handed this document to him. As a result of the conversation that followed the appellant formed the belief that Mr Maher had sent Mr Short a copy of the Maher report with other documents (the bundle of documents) and that Mr Short had sent them or copies to the liquidator or the receiver of Australian Picasso Collections Pty Limited (the company) or possibly to both. This had been one of the appellant's companies, and was the principal claimant in the fire claim. 12 Mr Short said in his affidavit that after examining the document the appellant handed to him on 6 February 2006 he identified the words "sent to liquidator" on it as his handwriting. He asked the appellant where he had got it. The appellant said he thought he had found it in one of the company's files which had been returned by the receiver or liquidator. Mr Short said that a search might reveal the other documents he had received from Mr Maher. "A few days later" the appellant showed him copies of the bundle of documents and Mr Short's statutory declaration dated 15 April 1998 which Mr Short said he had sent to the liquidator (the statutory declaration). 13 Mr Short annexed copies of the bundle of documents (the "Maher Bundle") as follows: (a) Mr Maher's business card; (b) Mr Maher's covering letter for the bundle, (c) A letter from McCabes to the solicitors acting for the company in connection with its fire claim; (d) The gambling records of the appellant from the Sydney Casino; (e) The police report; (f) The Maher report. 14 He also annexed a copy of the statutory declaration. He said in this that he received a phone call from Mr Maher "and had a conversation as recorded in my note" and later received the Maher bundle. He then referred a second time to "my note relating to the conversation Maher had with me". 15 In 1997 one of Mr Short's companies held a registered charge over the company. In December 1997 an order was made for the company to be wound up on the application of the National Australia Bank. In December 1998 Mr Short appointed a receiver and manager pursuant to the registered charge. He concluded his affidavit by saying that he forwarded "almost all my files in their original form relating to the business affairs of [the appellant] and his companies to the receiver and manager". 16 In his second affidavit of 15 October 2007 the appellant stated that in July or August 2007 he was asked by his solicitor Mr Coffey, a partner in the firm of Gells, to ask Mr Short to collect his files from the fire claim proceedings. The appellant spoke to Mr Short about this. In his second affidavit of 16 October 2007 Mr Short confirmed this conversation. 17 In September 2007 the appellant inspected a number of the company's files at the offices of Gells. He said that in the course of this inspection "I located copies of two documents which bore original handwritten notations, … of which I was provided with copies". 18 He identified these documents and annexed to his affidavit a photocopy of what purported to be a file note dated 3 March 1998 of the conversation (the longer note). The handwritten words "Rec'd 20/5/98 Handwritten notes by BS" appeared on the longer note. A copy with "original handwritten notations" was never produced. He also annexed a photocopy of a letter dated 6 May 1998 written by the liquidator to the solicitors acting for the insurers on the fire claim. The photocopy showed a handwritten note: "Re: BS's handwritten notes". Mr Coffey identified both notations as his handwriting. However he could not recall having seen them before the appellant showed them to him. The appellant said that he had not been aware of either document until he saw them in the file. 19 Mr Short said in his second affidavit that he wrote ex 1(D1) during the conversation and he wrote the longer note later that day and placed both in his file relating to the company. He sent a copy of the longer note to the liquidator on or about 15 April 1998 and that this was "the note" referred to in the statutory declaration. He sent the whole file to the receiver in late 1998, and had not seen the longer note since. He had not given it to anyone else in 1998. (T 192-193) 20 The evidence upon which the appellant relies to support an order for a new trial is the longer note, the Maher bundle, and the statutory declaration. 21 The common law principles which this court is bound to apply on an application for a new trial on the ground of fresh evidence are well settled. They are to be found in Orr v Holmes [1948] HCA 16, 76 CLR 632; Wollongong Corporation v Cowan [1955] HCA 16, 93 CLR 435, McDonald v McDonald [1965] HCA 45, 113 CLR 529 and Commonwealth Bank of Australia v Quade [1991] HCA 61, 178 CLR 134. In Cowan's case (above) Dixon CJ said at 444: "… it is essential … that the verdict, regularly obtained, must not be disturbed without some insistent demand of justice. The discovery of fresh evidence in such circumstances could rarely, if ever, be a ground for a new trial unless certain well-known conditions are fulfilled. It must be reasonably clear that if the evidence had been available at the first trial and had been adduced, an opposite result would have been produced or … it must have been so highly likely as to make it unreasonable to suppose the contrary. Again, reasonable diligence must have been exercised to procure the evidence which the defeated party failed to adduce at the first trial." 22 In Quade's case (above) at 141-2 the court said in its joint judgment: "… the reconciliation of the demands of justice and the policy that there be an end to litigation at least prima facie … dictate that the successful party should be deprived of the verdict in his favour only if the unsuccessful party persuades the appellate court that there was no lack of reasonable diligence on his part and that it is reasonably clear that the fresh evidence would have produced an opposite verdict. Such a stringent rule in that ordinary class of case is supported by considerations of both justice and public interest. Considerations of justice support it in that it would be unfair to the successful party if he were to be deprived of a verdict obtained after a trial on the merits and be subjected to the expense, inconvenience and uncertainty of a further trial merely because some relevant evidence had, without fault on his part, been unavailable to the unsuccessful party at the time of the trial. Considerations of public interest support it in that it is desirable in the public interest that there be finality in litigation in other than the truly exceptional case … The position is, however, different in a case such as the present where the unavailability of the evidence at the trial resulted from a significant failure by the successful party to comply with an order for the discovery of relevant documents in his possession or under his control." 23 The court has also received an affidavit by Mr Coffey, the solicitor who acted for the appellant on the s 7A trial, and an affidavit by Mr Mark Wells who purchased the business known as National Art Galleries from the appellant in 2003. The deponents other than Mr Wells were extensively cross-examined, and further documentary evidence was received. Counsel for the respondents have challenged the authenticity of the longer note and the credibility of the oral evidence of the appellant and Mr Short about it. They have also submitted that the note, the bundle of documents and the statutory declaration do not satisfy the demanding requirement that the fresh evidence must be virtually conclusive. 24 It is not necessary to decide the authenticity and credibility issues because in my judgment the appellant has failed to establish that he and his legal advisers used reasonable diligence before and at the trial to obtain the further evidence now relied on. This ground for refusing a new trial does not depend on the general merits of the appellant's case, the weight of the new evidence, or its probable effect on the trial if it had been produced. 25 The requirement for the exercise of reasonable diligence reflects the principle that there must be an end to litigation and recognises that the pursuit of perfect justice can come at too high a price if it prolongs litigation with its attendant cost, inconvenience, and uncertainty. It prevents parties who have gone to trial under-prepared being rewarded for their lack of diligence with a second chance before another jury. The trial of an action is not a dress rehearsal for a second trial, or for a rehearing in an appellate court with additional evidence: Coulton v Holcombe (1986) 162 CLR 1, 7. 26 The first point to note on the reasonable diligence issue is that the appellant adduced no evidence from Mr Coffey, his solicitor in the defamation proceedings, as to the investigations he undertook both before and during the trial to locate all documents relevant to the critical issue of the alleged slander. As will be apparent from the following discussion, the further evidence on which the appellant seeks to rely at the new trial was at relevant times, prior to, and during, the s 7A hearing, in his or his solicitor's possession, or readily obtainable from Mr Wells. 27 The only note Mr Short mentioned in his evidence in chief at the trial was ex 1(D1). However he said more than once during his cross-examination that he had made two sets of notes, one more detailed than the other, and that ex 1(D1) was the shorter of the two. His cross-examination commenced at the bottom of p 120 of the transcript and his first reference to a second note appears at the top of p 126. Further references to a second note appear on pages 127, and 146 on 31 January 2006, and on pages 185, 186, 187 and 191 of his evidence on 1 February. 28 The first affidavits from the appellant and Mr Short establish that on 6 February 2006 Mr Short was immediately able to identify his handwriting on the copy of the Maher report he was shown by the appellant. He could also identify the document as one he had received from Mr Maher as part of the Maher bundle. 29 As a result of this information the appellant spoke to Mr Wells. A few days later he received from Mr Wells 226 pages of documents which became ex MW1 to the latter's affidavit. The appellant showed Mr Short a number of these documents, and he identified copies of the Maher Bundle and the statutory declaration. 30 The appellant's evidence thus establishes that he had in his possession before the trial a copy of the Maher report bearing a note in the handwriting of Mr Short "sent to liquidator". When shown this document Mr Short was immediately able to suggest a line of inquiry which led to the discovery of copies of the Maher bundle, and the statutory declaration. They were found in a file which had been in the appellant's possession in 2003 and for an unknown time before that. 31 The original statement of claim was filed on 15 November 2001 (black 331). The s 7A trial began at the end of January 2006. Mr Short was the vital witness in the plaintiff's case, and would be giving evidence of the conversation nearly 8 years after the event. It was therefore essential for the matrix of the relevant documents to be assembled to enable Mr Short to refresh his recollection of the conversation and the surrounding events. 32 The ease and speed with which the appellant was able to obtain possession of the bundle of documents and the statutory declaration after the trial, establishes, in my judgment, that reasonable diligence was not exercised to obtain them before the trial. 33 The appellant also relies on the documents he discovered in Mr Coffey's file in mid-September 2007. The copy of the letter from the liquidator to the solicitors for the underwriters dated 6 May 1998 is of marginal relevance, if that, and may be disregarded. The critical document is the longer note.

34 The appellant said he discovered a copy of the longer note in a correspondence file of Mr Coffey, his solicitor in the defamation proceedings, who had also acted for the receiver in the fire claim proceedings. 35 The longer note, assuming it was genuine, was relevant in the fire claim proceedings because it evidenced the improper pressure that Mr Maher had attempted to exert on Mr Short to prevent the fire claim being litigated. It concluded: "He will send some supporting legal documents in next few days but first he has to discuss this with his clients and lawyers." 36 Thus consideration of the longer note would have prompted an inquiry from Mr Short about any documents Mr Maher may later have sent him. Mutual discovery was ordered in the fire claim proceedings brought by the receiver in the name of the company and the original or any copy of the longer note in the possession or power of the company, its receiver, or its liquidator should have been discovered by the plaintiff.

37 The fire claim appears to have been the principal asset covered by the charge. Although documents in the possession of Mr Short or his company may not have been in the possession or power of the plaintiff Mr Short said in his second affidavit that he had sent his original file to the receiver and that the original of ex 1(D1) and the longer note had been placed in this file. It also appears from that affidavit that the Maher bundle and a copy of the statutory declaration were sent to the liquidator and possibly to the receiver as well. The latter may also have obtained those documents or copies from the liquidator. 38 The longer note would have been of vital importance in the appellant's defamation action. It purported to have been made on the day of the conversation and was the only contemporaneous document which referred to the allegation by Mr Maher that the fire claim was fraudulent and the damage had been deliberately caused. 39 An order for mutual discovery was made in the defamation proceedings but the longer note was not discovered by the appellant. The appellant also failed to discover the Maher bundle and the statutory declaration that were in a file in his possession when the proceedings were commenced that remained in his possession until delivered to Mr Wells. 40 The duty imposed on a party and his solicitor by an order for discovery is an onerous one. In Myers v Elman [1940] AC 282, 322 Lord Wright said: "The order of discovery requires the client to give information in writing and on oath of all documents which are or have been in his corporeal possession or power … A client cannot be expected to realise the whole scope of that obligation without the aid and advice of his solicitor, who therefore has a peculiar duty in these matters as an officer of the Court carefully to investigate the position and as far as possible see that the order is complied with. A client left to himself could not know what is relevant, nor is he likely to realise that it is his obligation to disclose every relevant document, even a document which would establish, or go far to establish … his opponent's case. The solicitor cannot simply allow the client to make whatever affidavit of documents he thinks fit nor can he escape the responsibility of careful investigation or supervision. If the client will not give him the information he is entitled to require or if he insists on swearing an affidavit which the solicitor knows to be imperfect or which he has every reason to think is imperfect, then the solicitor's proper course is to withdraw from the case. He does not discharge his duty … by requesting the client to make a proper affidavit and then filing whatever affidavit the client thinks fit to swear to." 41 A party and his solicitor are not entitled to rely on their unrefreshed recollection of the existence and whereabouts of relevant documents. Both are required to undertake appropriate searches and make appropriate inquires for documents which would assist their case as well as for those which would not. The appellant's searches in September 2007 revealed the existence of the longer note in a file in the possession of his solicitor. A search through Mr Coffey's files was no doubt tedious, but the need to undertake such a search was obvious. The file covered correspondence in February and March 2000 in the period immediately before the start of the trial in the fire claim proceedings. If the longer note was in that file before the trial of the defamation case (a matter vigorously contested by the respondents on the issue of its authenticity) it should have been found much earlier. 42 This is a most unusual case because the fresh evidence was located after the trial in a file held by the solicitor for the appellant and in a file which had been in the appellant's possession while the action was pending before being delivered to Mr Wells. 43 Mr Short's cross-examination at the s 7A trial had proceeded for only 6 pages of transcript before he mentioned the existence of a second note. The inescapable inference is that appropriate proofing, and questions in conference, based on ex 1(D1) and the much longer "to whom it may concern" statement of 4 December 1999 (blue supp 15), would have prompted Mr Short to recall the existence of a second note. This would have led to searches and the discovery of a copy of the longer note in Mr Coffey's file. 44 The appellant also had in his possession before the trial a copy of the Maher report with Mr Short's handwritten notation "sent to liquidator". According to his chronology by August 2003 he also had an unmarked copy of the same report (orange 59). The evidence does not reveal how or when either came into his possession. 45 The notation on the copy of the Maher report was not in the handwriting of the appellant or his solicitor. Something about its provenance or the handwriting suggested to the appellant, after the trial, that the handwriting might be that of Mr Short. The appellant's solicitors provided a copy of this document to the solicitors for the respondents by way of further discovery before the s 7A trial. 46 The appellant's legal advisers should have asked questions about this document and its provenance. It is reasonable to suppose that such questions would have revealed that the handwriting was that of Mr Short. This in turn would have led to the discovery of the Maher bundle and the statutory declaration in the file held by Mr Wells. 47 The appellant relied on the failure of Mr Maher to disclose in his affidavit or list of documents that the Maher bundle had been in his possession before it was sent to Mr Short. No such complaint can be made against the other defendants. Even if one assumes in favour of the appellant that Mr Maher did send the Maher bundle to Mr Short, it does not follow that the failure was wilful or careless. Mr Maher may simply have forgotten that he had sent those documents to Mr Short. 48 A significant default in giving discovery led to an order for a new trial in Quade's case [1991] HCA 61, 178 CLR 134. In the present case any default by Mr Maher is counter-balanced by a similar, if not greater, default by the appellant in respect of the same documents which were in his possession or power. 49 Although the common law requirements that the new evidence would probably have been conclusive and that reasonable diligence was exercised to obtain it prior to the trial are modified where the successful party failed to give proper discovery, there is no apparent reason why this should affect defendants who were not implicated in that default. 50 In any event there was a further default by the appellant in failing to discover the statutory declaration and the longer note. 51 In these circumstances the Quade principles cannot assist the appellant. 52 The appellant's legal advisers served an appropriate subpoena to produce documents on Mr Short, and another on his company Elizabeth Street Finance Pty Limited, in good time, but the bundle of documents, the statutory declaration and the longer note were not produced, nor were any copies. However the fact that reasonable diligence was exercised in some respects cannot excuse failures elsewhere. 53 Thus it has not been established that the appellant and his legal advisers exercised reasonable diligence to obtain the further evidence before the trial. 54 The principles relevant in this case do not apply where there has been fraud, subornation of witnesses, surprise or other malpractice: Quade's case (above) at 140-1. However in those cases the appellate court must, on a trial of the issue, find that fraud, surprise or malpractice has been proved: McDonald v McDonald (1965) 113 CLR 529, 533, 535, 540, 542, 544. The only malpractice relied on here was Mr Maher's alleged default in discovery, a matter which it is unnecessary to determine. 55 The new evidence, if reliable, would suggest that Mr Maher may not have told the truth at the trial about the conversation, but since fraud and perjury were not relied on the rules which apply to the grant of a new trial on the ground of the discovery of fresh evidence apply with undiminished stringency: McDonald v McDonald (above) at 533 per Barwick CJ. In any event, as the High Court said recently in its joint judgment in SZFDE v Minister for Immigration and Citizenship [2007] HCA 35, 232 CLR 189, 196: "It has been said in this court that, except in very exceptional cases, fraud constituted by perjury by a witness or witnesses acting in concert is not a sufficient ground for setting aside a judgment." 56 Although it is not necessary to make findings about the authenticity of the longer note and the related evidence of the appellant and Mr Short, it is not at all clear that the new evidence would have been conclusive. It depends on the credibility of the appellant and Mr Short at every point. The appellant has not been able to produce the original of the longer note, or a copy from a source which was not open to challenge. Nor has he been able to explain how a copy came to get into his solicitor's file, how it came to have Mr Coffey's handwriting on it, or its provenance. Mr Coffey had no recollection of seeing the longer note before the appellant showed it to him in September 2007. Mr Short said that in 1998 he had only given it to the liquidator or the receiver. 57 It cannot be said therefore that the new evidence is so compelling that it should displace the requirement of reasonable diligence. The law is otherwise where misconduct is not alleged and proved, but in any event, for the reasons given, the further evidence is far from conclusive. 58 In my judgment the appeal fails and should be dismissed with costs.

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