Ultra Modern Developments Pty Ltd v Hill-Harrison

NCAT Consumer and Commercial|2014-08-14

Application 1Application HB 13/62096 is a building claim by the holder of a Contractor's licence issued under the Home Building Act 1989 (called in these reasons for decision "Builder") for an order that a home owner (called in these reasons for decision "Home Owner") pay an amount of $10,045.79 being the balance of monies alleged to be due under a Contract for residential building work. 2Application 14/03840 is a building claim in the nature of a cross claim by the Home Owner for an order that the Builder pay to the Home Owner: (a)Overcharging in respect of unsigned variations in the amount of $9,690.83; (b)Liquidated damages in the amount of $17,458.87; (c)Further or in the alternative to (b) above, loss of use of property in the amount of $800 per week (for 2 units); (d)The sum of $18,350.00 in respect of the deletion of the construction of eave overhangs from the scope of works. 3The applications are heard together and the evidence of one application is the evidence of the other. 4In these reasons for decision the parties are referred to respectively as the Builder and the Home Owner.

Jurisdiction and Law 5These applications are building claims made pursuant to the Home Building Act 1989 ("Act"). 6A building claim as defined in the definitions set out in s48A(1) of the Act includes a claim for the payment of a specified amount of money that arises from a supply of building services under a Contract for the supply of building goods or services in the carrying out of residential building work. 7S48KI (1) of the Act provides that any person may apply to the Tribunal for determination of a building claim. 8Pursuant to s48K(1) of the Act the Tribunal has jurisdiction to hear and determine any building claim brought before it in which the amount is less than $500,000.00 and pursuant to s48K(3) the claim is lodged less than three years after the date on which the supply was made. 9As to the matters before the Tribunal with the exception of the Home Owners claim for loss of rent, The Tribunal is satisfied that it has jurisdiction to hear and determine the Builders and the Home Owners claim. 10A jurisdictional issue has been raised by the Builder in respect of the Home Owners claim for loss of rent arising from the alleged breach of Contract. The Tribunal will address this issue in the body of these reasons for decision.

Agreed Facts 11The Builder provided the Home Owner with a quotation for the proposed building works on or around 12 July 2012. 12The Home Owner and the Builder negotiated to have variations to the quote. There were 14 variations made to the proposed building works as set out in the quote. 13The Home Owner and Builder entered into a contract incorporating the 14 variations to the quote for the carrying out of residential building work on 16 July 2012 (referred to in these reasons for decision as "the Contract"). The building work in the Contract consisted of the Builder building a double storey brick veneer duplex dwelling on land owned by the Home Owner at Kiama Downs for a price of $413,798.80. 14The building work commenced on 14 August 2012. 15The building works reached practical completion on 6 August 2013, being a total of 224 working days. 16Clause 32 of the Contract allowed the building works to be completed within 250 working days. 17The building works reached practical completion within the time allowed under the contract. 18The Home Owner has paid to the Builder $402,062.44 by instalments as required under the Contract. 19During construction the builder contends that it made 23 variations to the Contract sum. Those variations are numbered 14 - 37 inclusive and that the total price of the work is $412,108.23 20The Home Owner has paid to the Builder $402,062.44. 21The Builder claims $10,045.79 from the Home Owner being the difference of the Contract price plus variations 14-37 and the amount paid by the Home Owner to the Builder.

Home Owners Claim and Evidence 22The Home Owner's claim has four heads. A claim for the variations the Home Owner says the Builder is not entitled to, the deletion of the eaves, incomplete and defective work and breach of Contract or alternatively misleading and deceptive conduct.

Variations 23Special Condition 14 of Schedule 4 of the Contract sets out "How to Deal with Changes to Work". The Special Condition provides that works can be varied during the course of construction. Special Condition 14 (b) sets out when a variation is established by: (i)Written instructions from the Owner or the Owners representative: and or (ii)The supply to the Builder of post Contract details such as drawings; and or (iii)The discovery of an otherwise unknown or latent condition; and or an instruction issued by a relevant authority under Clause 12 24Special Condition 14 (c) provides that: The Builder is not obliged to vary the Contract works or carry out any extra work unless the Builder consents. Such consent will not be unreasonably withheld. 25Special Condition 14 (d) provides: (i)If the Builder agrees to undertake a variation requested or required by the Owner, the variation is to be detailed in writing and signed by the owner (or the Owner's agent) and the builder. Documents detailing the variation, including as appropriate, amended drawings or specifications, become Contract documents. (ii)The Builder may require, prior to execution of any variation that the Owner produce evidence, satisfactory to the Builder, of the Owner's capacity to pay for the variation. 26The Contract makes no provision for variations to be unilaterally carried out without the consent of both parties. 27The Home Owner admits the variations except for the variations set out in the following table: Variation Number Amount ($) 24 1,722.89 28 484.80 29 175.17 30 244.20 31 11,110.19 32 225.15 33 195.79 Total 14,158.19

28Generally, it is the Builder's submission that if it is not successful in its claim for variations because the variations do not comply with the contract then it is entitled to claim on a quantum meruit basis. 29The contract provides for variations and the way they are to be dealt. The Tribunal cannot accept that the builder can do what it likes beyond the terms of the contract and then expect to recover the cost of its actions on a quantum meruit claim. To do so, for these variations within the control of the Builder would defy the reason for the provisions in the contract for variations and the notion of a fixed price contract. 30The Home Owner's and the Builder's evidence in relation to each of the variations under dispute is as follows: A Variation 24: (1)The Builder claims that this variation was made because the windows were held in storage at the Home Owner's request for a longer period between manufacture and delivery and they needed to be re-revealed at a cost of $1722.89. They allege the delay was caused by the Home Owner's delay in clearing the site, in which the Tribunal makes a finding below. (2)The Home Owners evidence is that he did not request the Builder to hold the windows in storage. He disputes being charged for such a variation when the windows were in any case held in storage. (3)Clause 11 (f) of the Contract provides for compensation for delay. This issue is dealt with below. (4)The Tribunal notes there is no writing signed by both the Builder and Home Owner for this variation. (5)The amount claimed is not allowed to the Builder. B Variation 28: (1)The Builder claims an additional $484.80 being the additional cost of an amended hydraulic plan obtained as a consequence of variation 5 which was incorporated into the Contract. The additional amount is because the original charge was less than actual cost. (2)The Home Owner claims that this variation should not be allowed because it is a claim for an additional cost that was covered on a fixed price quote. (3)The Tribunal notes that there is no writing by both the Builder and Home Owner for this variation and it is a claim for an additional amount when a fixed price for the item had been agreed. (4)The Tribunal does not allow the Builder this variation. C Variation 29: (1)The Builder claims an amount of $175.17 being the GST alleged to have not been charged on variation 15. (2)The Home Owner claims that the amount paid under variation 15 includes GST. (3)Variation 15 tendered with the Home Owners Bundle of documents is signed by both the Builder and Home Owner. The amount payable states that it is inclusive of GST. (4)Variation 29 does not have a signature of the Home Owner on it. (5)The Tribunal finds that variation 29 is not allowed as on the face of the evidence GST was included in variation 15 agreed to by the Builder and Home Owner at the time. D Variation 30: (1)The Builder claims an amount of $244.20 being a charge in addition to variation 24 because a crainage charge had not been made for handling windows. (2)The Home Owner claims that it is a charge consequential on the Builder holding the windows in storage and was not agreed to or authorised by him. (3)Clause 11 (f) of the Contract provides for compensation for delay. This issue is dealt with below. (4)The Tribunal notes there is no writing signed by both the Builder and Home Owner for this variation. (5)The Tribunal does not allow the variation to the Builder. E Variation31: (1)The Builder claims a charge for delay arising from the actions of the Home Owner claiming 7 weeks damages at $1,587.17 per week. The Builder relies on Schedule 2 page 7 of the Contract. (2)The Contract provides for an amount to be paid by the Home Owner of $1,587.17 per week if clause 11(f) is breached. (3)Clause 11(a) provides: Should the progress of the works be delayed by any of the following matters, conditions or consequences resulting from: .... (v) any act, default, delay or omission on the part of the Owner in providing instructions, making payment or doing a thing necessary to allow the works to proceed (including signing instructions concerning variations) ...then in any such case the Builder must receive a fair and reasonable extension of time of the Construction Period. (4)Clause 11 (f) provides If the delay results from any of the matters listed in paragraphs (ii), (iii), (iv), (v), (vi) or (xi)of clause 11 (a), then the Contract price is to be adjusted to include an amount calculated to cover the cost or expense of the delay incurred by the Builder. Variation delays are adjusted pursuant to Clause 14. The amount payable will be determined with reference to Item 3 (b) of Schedule 2. In addition to any actual costs incurred by or payable by the Builder because of the delay which in total exceed the amount payable with reference to the period of delay and the amount stated at Item 3 (b) of Schedule 2, to the extent of the difference, will also be payable by the Owner. (5)The Home Owner is responsible for removal of any burden or spoil and to remove rock from the site pursuant to Clause 7 of the Schedule 4. (6)The evidence adduced by the Builder tendered through its former building supervisor of delay is a Job sheet for the works showing delay "By Owner" from 15 August 2012 until 3 October 2012 with the cause noted as "placing rock at rear of block in way of drainage" (7)The evidence of the plumber and drainer is that when he went to the building site to install an absorption pit and external drainage he could not do so because rock and spoil had not been removed. As a result work on the site was delayed. (8)The Builder's evidence is that the delay in the removal of the rock and spoil caused the works to be delayed. (9)On the Builder's evidence before it, the Tribunal is satisfied that the Home Owner did not fulfil his obligations to remove the rock and spoil. The installation of drainage within the proposed slab area and beyond that area and the associated absorption pit needed to be carried out before the concrete for the slab to be poured. Until the footing or foundation in the nature of the slab was completed the substantive building works could not proceed and was a fundamental cause of the overall building works being delayed. (10)The effect of Clause 11 is twofold. It permits the time for completion of the Contract to be extended by the term of the delay caused by the Home Owner and also entitles the Builder to compensation. (11)The Home Owner denies that the rock and spoil he was responsible for resulted in the works being delayed. He also submits that the other works proceeded and the Contract works were completed well within the time allowed under the Contract and therefore the Builder suffered no loss and is not entitled the damages for delay. The Home Owner's evidence is that a variation to the Contract in relation to piering was agreed to on 20 August 2012. The Home Contends that variation allows a conclusion to be drawn that the building works were not delayed. (12)The Tribunal prefers the evidence of the Builder on this issue and when that evidence is considered together he has satisfied the civil standard of proof that the failure by the Home Owner to remove the spoil caused delay to the works. (13)The Tribunal is satisfied that the Builder has established that the Home Owner by failing to remove the rock and spoil out of the way or completely form the site caused the delay. (14)Clause 11(f) contemplates on the happening of an event referred to in Clause 11 (a) (v) that the "The Contract price is to be adjusted to include an amount calculated to cover the cost or expense of the delay incurred by the Builder... the amount will be determined with reference to Item 3 (b) of Schedule 2." (15)The Tribunal is further satisfied that the amount claimed by the Builder under variation 31 is a proper charge to make and is made in accordance with Clause 11 of the Contract. The Tribunal allows the Builder the amount claimed of $11,110.19. F Variation 32: (1)The Builder has claimed an additional amount of $225.15 for the additional cost of perimeter fencing alleged to have been caused by the delay of the Home Owner. (2)The Home Owner submits that for the claim the Builder relies on an invoice that is for fence hire from 30 May 2012 to 20 November 2012. The Contract was entered into on 16 July2012. Works commenced on 14 August 2012. (3)The allowance in variation 31 covers costs incurred as a result of the delay. Clause 11 (f) "...In addition any actual costs incurred by or payable by the Builder because of the delay which in total exceed the amount payable with reference to the period of the delay and the amount stated in Item 3 (b) of the Schedule 2, to the extent of the difference, will also be payable by the Owner." That is, the Builder is not entitled to actual costs over and above the amount in Item 3 (b) until they exceed that amount. (4)Further, the Tribunal notes there is no writing signed by both the Builder and Home Owner for this variation. (5)The Tribunal does not allow the Builder the variation. G Variation 33: (1)For the same reasons as those given for variation 32 the amount claimed for additional toilet hire is not allowed to the Builder. 31To summarise the amounts allowed to the Builder for variations the table is now reproduced with those amounts identified and set out. Variation Number Amount Claimed($) Amount allowed by Tribunal ($) 24 1,722.89 0 28 484.80 0 29 175.17 0 30 244.20 0 31 11,110.19 11,110.19 32 225.15 0 33 195.79 0 Total 14,158.19 11,110.19

32The Tribunal has disallowed the Builder's variations 4, 28, 29, 30, 32 and 33, totalling in value $3,048.00 which had been paid by the Home Owner. The Builder must repay that amount

Deletion of Eaves 33Much of the evidence of the parties was directed to the eaves not having been installed by the Builder on the building. 34The plans approved and forming part of the Contract and tendered as part of the agreed bundle of documents clearly show eaves to be supplied and included in the works. It is undisputed that the building as built has been built without eaves. 35The omission of the eaves is clearly an error on the part of the Builder. The Builders evidence is that the roof trusses were supplied by the frame and truss supplier without the eaves. Nevertheless the Contract is between the Home Owner and the Builder. The Builder bares the responsibility for the error. 36The Builder has attempted to cover its error by drawing an inference that the Home Owner approved deletion of the eaves at about the time that the fascia's were about to be installed. The evidence of the Builder is that its supervisor, the fascia fixer and his subcontractor had discussions with the Home Owner about the lack of eaves. 37None of the Builders witnesses were convincing in their evidence in answer to the Home Owners evidence that no discussion took place at the time the fascias were installed. The evidence of the Builders witnesses is given less weight than they otherwise would have been the case. They were uncertain and lacked detail. The irregularity with what purported to be Statutory Declarations signed by the declarants and dated the day before the justice of the peace signed those, raises considerable doubt about the care that was taken with the evidence contained in the statements and how reliable it is. 38Regardless, the Builder attempted to resolve the error by allowing an amount of $11,545.79 in favour of the Home Owner in variation 36. Then the allowance was unilaterally withdrawn and reduced to $1,500 in a further variation 37 which appears to be based on the Builder's own estimate of the actual cost of the building being built without eaves compared with the cost of building it with eaves. 39The Home Owner submits that it is entitled to the full allowance as had been agreed with the Builder of $11,545.79. If not, then he presses his claim for the cost of the replacement of the eaves as estimated in the expert report tendered to the Tribunal in the sum of $19,500.00. 40The Tribunal finds that the amount agreed by the parties for the allowance on the eaves in the amount of $11,545.79 as an allowance is not recorded in writing as a variation. At its highest it was an oral agreement. All variations are required under the contract to be in writing and signed by both parties. With the Builder unilaterally withdrawing from the agreement it is now faced with the claim for a defect. 41The Builder's employee has estimated the cost of the reduction in cost as a result of the eaves not being installed in the sum of $1,500.00. This amount has been included in variation 37. The Builder claims that the Home Owner is bound by the assertions made in a letter from the Home Owners former solicitor that the Home Owner had agreed to the deletion of the eves. The Home Owner denies this assertion and answers the claim by submitting that his former solicitor did so without instructions. 42The Tribunal prefers the Home Owners evidence in relation to his assertion that the Builder had not discussed with him the omission of the eaves at the time of the fascia work and that it was a matter that was attempted to be resolved at the time that the Builder purported to make variation 36. 43The Home Owner's expert, the expert evidence tendered to the Tribunal has the estimated cost to remedy the defect as $19,500.00. A quote is tendered by the expert's related company for the eave work in the sum of $18,350 inclusive of GST. The expert's opinion was tested under cross examination. Despite the Builders counsel agitating against it, the Tribunal is satisfied that the expert's evidence of cost of replacing the eaves is a reasonable assessment of the value of the omitted eaves and the Home Owner is entitled to that amount. It is the preferred assessment of the cost. The Tribunal notes that the Builder has included in variation 37 $1,500.00 of the allowance for the eaves and accordingly the Builder will be ordered to pay the difference in cost in the amount of $16,850.00 as compensation for the eaves.

Incomplete, Defective and other Work not in accordance with the plans and specifications 44The Home Owner alleges that there are other incomplete and defective works. These works are set out in the expert's report and an estimate of cost is given for their remedy. 45The Builder discounts the experts report in this regard as it submits that the expert has no costings of any amounts that he quotes for work needing to be done. 46The expert's report fails to provide a quote with any degree of certainty. An estimate is not sufficient to establish the cost to remedy the defect. 47The Tribunal is not satisfied that the estimate of cost of relocating the hot water services and the repaint of the window reveals is sufficient for it to be satisfied on the civil standard of proof that it can make an order to compensate the Home Owner for the alleged loss. 48However, as to the supply and installation of the two hot water services, the Tribunal must make an assessment for the allowance to be made for the Builder's failure to supply and install those hot water services, the price of which has been included in the contract. In the absence of distinct evidence of the cost of the hot water services and their installation it is for the Tribunal to make its own assessment so that the matters before the Tribunal can be concluded. The Tribunal assesses the amount to be allowed to the Home Owner for the failure by the Builder to supply and install two hot water services to be the amount of $2,400.00.

Breach of Contract 49The Home Owner claims that he is entitled to damages for breach of contract. 50It is common ground that the building works reached practical completion on 6 August 2013 and in accordance with the Contract both parties have signed their respective Notices of Practical Completion. 51The Home Owner disputed, and still disputes, that he owed any further monies to the Builder. 52The Contract provides at Clause 23: (c) When practical completion is achieved, the Builder is entitled to and must receive the unpaid balance of the Contract price or sum together with any other monies which are payable in connection with this Contract. (d) The Owner is not entitled to take possession of the works nor receive the keys and any certificates until payment to the Builder of all monies due under this Contract has been made. (e)The Builder, at the Owners cost is entitled to and required to take all actions to secure the property so as to prevent entry, other than by normal means, prior to final payment being made. 53The keys to the dwellings were given to the Home Owner by the Builder on 18 July 2014. 54Despite handing the keys to the Home Owner the Builder refuses to install the ovens, cook tops and hot water services. The Tribunal notes that during the hearing on 13 August 2014 the Home Owner and Builder consented to an interim order that the Builder install the ovens and cook tops by 22 August 2014. 55The Home Owner claims that he has suffered a loss arising from the Builders breach of contract being loss of rent he would otherwise have obtained from renting out the two dwellings. 56For the Home Owner to be successful in his claim for damages he must establish that his loss falls within the first or second limb of the test in Hadley v Baxendale (1854) 9 Exch 341. That is:

Did the loss result from the usual course of events? If so, the knowledge of the parties is irrelevant. They are assumed to know what the ordinary course of events would have been.
Was the loss in contemplation of both parties at the time they made the contract? If so, such knowledge is essential to recover damages. 57Did the loss result from the usual course of events? The Builder and the Home Owner reached a stalemate. The Home Owner refused to pay the last payment due to the Builder under the Contract, claiming it as an amount claimed in error because of the claims he made against the Builder. 58Clause 23 of the Contract imposes an obligation on the Home Owner to pay the unpaid balance of the "Contract price ...together with any other monies which are payable in connection with [the] contract". Until payment is made the Home Owner is not entitled to take possession of the works. The Home Owner has mistakenly refused to pay the balance of monies payable in connection with the Contract. It was open to the Home Owner to pay the amount outstanding and then make a claim against the Builder. He chose not to and the Builder has properly exercised its rights under clause 23 of the Contract by denying the Home Owner possession of the building. 59It must be assumed that the Home Owner knew what the ordinary course of events would have been. The Contract is in unambiguous terms. It sets out the consequences of not paying the final payment. It is clearly put in the Contract that the failure to pay the final instalment would deny possession of the premises to the Home Owner. 60The Home Owner fails to establish that his loss falls within the first limb of Hadley v Baxendale. 61Was the loss in the contemplation of the parties at the time they made the Contract? 62Clause 1 (b) (vi) of the Contract provides that; "Pursuant to s 18B of the Home Building Act 1989 (the "Act") the Builder warrants:- (vi) The work under the contract or the relevant part will be reasonably fit for purpose or result, if any, identified as a special purpose or result in this document. (refer to Schedule 2 point 10). 63The Item 10 of Schedule 2 of the Contract where "Special Purpose or Result" would be identified is struck through and "N/A" has been written in it. 64There is no evidence before the Tribunal that the applicant made known his intended use of the premises following completion. The Home Owner has also failed to establish his loss within the second limb of Hadley v Baxendale. 65The Home Owner has displayed no attempt to mitigate his alleged loss. He could have immediately made an application to the Tribunal, however, delayed doing so until after the Builder made its claim in the Tribunal and then by way of cross claim. 66The Builder handed the keys to the Home Owner on 18 July 2014. The Home Owner claims that as the hot water services and the stoves and ovens had not been installed he remains unable to use the buildings. The evidence before the Tribunal is that the Home Owner has had access to the buildings through his forced entry to the buildings. Again the Home Owner has failed to mitigate his alleged loss and it was always open to him to initiate proceedings for urgent relief. 67The Tribunal is satisfied that the Builder satisfied its obligation under the contract to deliver the building to practical completion stage within 250 days. 68The Home Owner seeks to rely on his own default in failing to make the final payment to the Builder resulting in the Builders contractual right to deny possession to the Home Owner. The Tribunal dismisses the claim for damages.

Misleading and Deceptive Conduct 69The Home Owner submits that in the alternative he is entitled to rely on s18 of the Australian Consumer Law ("ACL") that the Builder has engaged in conduct that is misleading or deceptive. 70S18 provides: (1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 71By the Builder denying the Home Owner possession of the dwellings he asserts that: (a)The Contract is based on trade or commerce and therefore s18 applies; (b)On his assertion that no money is owing the representations that monies are owed to the Builder is of itself misleading and deceptive; (c)Pursuant to s7D(1) of the Home Building Act 1989: (1)A contract does not give the holder of a contractor licence or any other person a legal or equitable estate or interest in any land and a provision in a contract or other agreement is void to the extent that it purports to create such an estate or interest (d)The Builder is unable to secure an interest against real property being the dwelling, pursuant to the Personal Property Securities Act 2009 (Cth) (e)The Builder has no legal rights over the site, other than as a licensee with consent of the Home Owner; (f)The Builder has no right to exclude the Home owner from the site Floruit Holdings Pty Ltd & Anor v Sebastian-Builders & Developers Pty Ltd [2009] NCSWCA 303; (g)A person holding title to land is entitled to access that land. 72These assertions are in support of the Home Owners contention that the Builder is in breach of s18 of the ACL and as a result the Home Owner has suffered loss because the premises were to be rented out on a commercial basis and he has been denied from doing so almost a year. 73 The Home Owner further contends that the Tribunal has jurisdiction pursuant to s 74(3) of the Fair Trading Act 1987and an "unfettered discretion in the award of damages". 74The Builder contends that the ACL and the Fair Trading Act have no application as they have not arisen from building works as defined in s48A of the Home Building Act. 75The Home Building Act at s48O(3) provides that the provisions of sections 9-13 of the Consumer Claims Act 1998 apply, with any necessary modifications, to and in respect of the determination of a building claim. 76However, the Tribunal has found that the claim for damages by the Home Owner arising under the Contract is unfounded. For the reasons given in relation to that failed claim the Tribunal does not consider that the claim of misleading and deceptive conduct has merit.

CONCLUSION 77As to the final determination: (a)The Home Owner pays to the Builder damages for delay $11,019.00. (b)The Builder pays the Home Owner compensation for the error in not installing eaves in the amount of $18,350.00 plus an allowance for the hot water services in the amount of $2,400.00, totalling $20,750.00. (c)The Builder to pay the Home Owner $3,048.00 being the amount of variations disallowed by the Tribunal that had previously been paid by the Home Owner. 78That is, the Builder is to pay to the Home Owner $23,798.00 less $11,019.00 total being $12,779.00.

Final Orders 79The Tribunal orders: (a)That the Home Owner is not required to pay the Builder the final instalment as claimed by the Builder of $10,045.79. (b)The Builder pays the Home Owner compensation in the amount of $12,779.00 on or before 7 January 2015. Philip Boyce Senior Member Civil and Administrative Tribunal of New South Wales 30 September 2014

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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. Decision last updated: 10 December 2014

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Judgment (14 paragraphs)

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