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Beecraft No 20 Ltd v Pok, Minister for Lands [2001] PGNC 85; N2125 (5 April 2001)

N2125


PAPUA NEW GUINEA


[IN THE NATIONAL COURT OF JUSTICE]


CIA No. 142 of 2000


BETWEEN:


BEECRAFT NO: 20 LIMITED

Appellant


AND:


DR. FABIAN POK AS MINISTER FOR LANDS

1ST Respondent


AND:


INDEPENDENT STATE OF PAPUA NEW GUINEA

2ND Respondent


WAIGANI: KANDAKASI, J.
2001: APRIL 5


LANDS ACT – State leases – Forfeiture of for alleged non compliance of improvement covenants and non payment of rentals – Evidence not supporting basis for forfeiter - Correct basis and procedure for forfeiture considered – Counsel for the Respondents conceding to orders sought - By consent forfeiture notice revoked – Land Act 1996 ss 142, 122, 81, 115 & 118.


COST OF PROCEEDINGS – Costs on Solicitor client basis – Where a party unnecessarily forces another to go to court it is appropriate to order solicitor client costs - Respondents order to pay the appellant’s cost on solicitor client basis - National Court Rules 1983 (Chp. 38) O. 22 r.11.


LAWYERS – Provisional Conduct Rules – Lawyer failing to attend on time and thereby delaying commencement of proceedings on schedule time – Failure of lawyers office to properly organise and manage cases and appear in court on time unacceptable excuse – Lawyer caution and warned against such conduct – Failure to adhere to warning may result in being cited for contempt of court – Provisional Conduct Rules ss.


Counsels:
Mr. R. Williams, for the Appellant
Mr. Kua, for the Respondent


10th August 2001


KANDAKASI, J: On the 13th of April 2000, the First Respondent forfeited the Appellant’s State Lease over a property described as State Lease, Volume 106, Folio 167 Allotment 44, Section 7, Granville, National Capital District (Business (Commercial Lease) (the Lease). That action was taken under s. 122(3) of the Lands Act 1996 (the Act) allegedly for non-compliance of improvement covenants and rents due and owing on the property for 6 months. The Appellant lodged this appeal against that decision under s. 142 of the Act contending that the forfeiture was an improper exercise of power because the time limits for the improvement covenant did not expire and all the rents have been paid up leaving nothing outstanding.


The main issue to be determined was whether the First Respondent correctly exercised his powers under s. 122(3) of the Act and therefore the forfeiture was valid.


I ruled that the forfeiture was invalid and ordered the relevant forfeiture notice gazetted in the National Gazette No. G.49 dated 8th May 2000, be revoked. I also ordered costs on a solicitor client basis against the Respondent. I then undertook to publish my reasons in writing. This I now do.


Chronology and Facts


The relevant facts are not disputed. The Appellant successful tendered for the Lease, with the gazettal of that appearing in the National Gazette, No. G32 dated 24th of April 2000. Both the reserved and tender price was K480, 000.00.


The Lease was granted subject to a number of conditions. Firstly, it must be used bona fide for business (Commercial) purposes only. Secondly, the Appellant was required to make improvements up to a minimum value of thirty plus million Kina for business (commercial) within 3 years from the date of the registration of title. Thirdly, the Appellant was required to pay annual rents of K40, 000.00 for the first 10 years of the lease, re-assessable at 5% of a re-appraised valuation of the land or at whatever other rate that may be decided as being appropriate after the first 10 years. Finally, the Appellant was required to allow for electricity, water and telephone services easements.


Subsequently, the Appellant applied for and was granted by the First Respondent a further three years in addition to the first three years for the improvements. The Land Board confirmed that by Decision No. DB 007/004, gazetted in the National Gazette No. G58 dated 31st July 1997. The Lease was then registered with the Registrar of Titles on the 30th of 1997.


On 16th of March 2000, the Secretary for Lands, Guao Zurenouc, a delegate of the then Minister for Lands, issued the appellant a notice to show cause within a period of 1 month why its Lease should not be forfeited. That was allegedly for failing to comply with the improvement covenants and for failing to pay the annual rentals for a period of more than 6 months.


By letter dated 13th April 2000, the appellant through its lawyer, Gadens, replied to Mr. Zurenouc’s letter. It pointed out that, the original improvement covenant period of 3 years was extended by the 31st July 1997 Gazettal No. G58. It then enclosed a copy of the relevant gazette as well as a copy of the State Lease, which showed that the title was registered on 30th of May 1997. On the basis of those documents, the Appellant informed the Secretary for Lands that, the time period for improvement to the land had not yet expired.


For the alleged non-payment of rents, the Appellant also enclosed a number of receipts showing various payments. They started with a K100, 000.00 payment on 16th May 1997 (Receipt No. 24245). That was followed by a K407, 816.43 on 29th May 1997 (Receipt No. 25286), and two lots of K40, 000.00 each on 29th April 1998 (Receipt No. 44158) and 23rd of June 1999 (Receipt No. 66979) for land rents and the tender price for the land. The Lands Department issued a Land Lease Rental Record Reconciliation on 21st December 1999 confirmed there was nothing outstanding in respect of the Lease. Given these, the appellant requested the Secretary for Lands to withdraw or otherwise revoke the notice to show cause and allow it to continue to exercise it rights under the Lease.


The letter was hand delivered to the Secretary for Lands also on 13th April 2000. Notwithstanding the appellant’s letter and the facts disclosed in that letter, the First Respondent forfeited the appellant’s Lease on 13th April 2000. That was even before the expiry of the notice to show cause on 16 April 2000.


The Appellant then lodged this appeal pursuant to s. 142 of the Act on 6th June 2000. That was after giving notice of its intention to do so, to the Solicitor General under s. 5 of the Claims by and Against the State Act.


At a Call-over conducted on 7th February 2000, before His Honour, Justice Salika, the appeal was listed for hearing on 5th of April 2000 at 9.30am. Present for the appellant was Mr. William while Mr. Kua appeared for the respondent.


The matter came before me for hearing on 5th April 2001, commencing at 9:30 am. Only Mr. William for the Appellant turned up in court in time when the matter was called for hearing. There was no appearance for the Respondent. I therefore, delayed commencing the sittings for about 4 to 5 minutes. I then had the matter called for hearing and still there was no appearance for the Respondent. In the circumstances, the Appellant’s lawyer applied for and I granted leave for him to proceed ex-parte. When the Appellant’s counsel was deeply into his submissions, Mr. Kua turned up in court. After the Appellant’s counsel had finished his submissions, I granted leave to Mr. Kua to be heard with the consent of the Appellants’ counsel. I will return to the Respondent’s lawyer’s conduct toward the end of the judgement.


Mr. Kua confirmed having attended at the relevant call-over and securing the date for a hearing of the matter. However, he said he did not have personal carriage and conduct of the matter on behalf of the State. It was Mrs. Kiele’s and she was out of the country undertaking postgraduate studies. It seemed no one in the Solicitor General’s office was briefed to take over the future carriage and conduct of the matter. I pointed out that, that was a common excused run by most of the lawyers in the Solicitor General’s Office and one I was not prepared to accept readily. I then directed Mr. Kua to speak to his superiors and get that area fixed and ensure that this kind of problem does not arise again. I then suggested that the time has now come for that office to get its acts together and device a system of properly attending to matters and fully discharge their responsibility as officers of the court both proficiently and professionally. They should ensure to avoid turning up in court late and giving all sorts of unnecessary and unacceptable excuses. I warned him that, if he continues in this kind of conduct and is repeated before me, I would not hesitate to cite him for contempt.


Mr. Kua then asked if I could adjourn the matter for another seven days so that he could go into written submissions. Before making a decision on his application, I ask what was he intending to say in his submissions when the facts appear not to be in dispute and it seemed to me that the First Respondent had acted without any good basis both in fact and in law. Mr. Kua then conceded that, there was no basis to argue against the appellant’s appeal and the orders that were being sought. He therefore, also conceded to the orders or the relief that were being sought by the appellant. On that basis I granted by consent the substantive relief sought by the appellant, which was to revoke the forfeiture notice.


The Appeal

The Appellant’s case was that, it was the registered holder of the Lease. It was still within the time limits for it to comply with the improvement covenants which was due to expire in the year 2003 after the grant of the extension of time for that. The rents were fully paid, leaving nothing outstanding, which was confirmed by the Lands Department’s own reconciliation statement. The show cause notice was premature and without any good basis. Cause was fully shown in answer to the show cause notice within the time required. However, the First Respondent forfeited the Lease prematurely again and without any good basis. The First Respondent therefore, purported to exercise its statutory power without any good basis and not according to law.


In the circumstances, the Appellant sought in lieu of the decision appeal from an order revoking the forfeiter notice published in the National Gazette G49 dated 8th May 2000, and costs on a solicitor client basis against the Respondents.


Appeals such as the present are provided for by s.142 of the Act. That provision reads in relevant parts:


"(1) An interested person may appeal to the National Court on –

(a) ...: or
(b) the forfeiture of a lease.

(2) An appeal under Subsection (1) shall be made within 28 days after the matter complained of or within such further time as the National Court for any special reason allows.

(3) Where an appeal is made under Subsection (1), the matter complained of has no effect until –

and, subject to Subsection (4), a lessee may in the meantime continue lawfully to occupy the land the subject of the appeal and to exercise his rights, and shall fulfil his obligations, under the lease.


(4) When an appeal is made under Subsection (1)(a) the decision of the National Court or of the Supreme Court shall be deemed to operate as from the date of the matter complained of."

The Respondents took no issue on the form and manner of compliance of the requirements of s. 142 of the Act. Hence there was no issue on those aspects. Thus, the matter was determined on the merits of the appeal.


Procedure for Forfeiture


Section 122 of the Act provides for the forfeiture of State leases. That provision reads as follows:


"(1) The Minister may, by notice in the National Gazette, forfeit a State lease –

(a) if rent on the lease remains due and unpaid for a period of six months; or
(b) if fees are not paid in accordance with this Act; or
(c) if the amount payable in respect of improvements is not paid in accordance with this Act; or
(d) if –
(e) If the granting of the lease has been obtained, in the opinion of the Minister, wholly or partly as a result of statements what were, to the knowledge of the lessee, false or misleading.

(2) Before forfeiting a State lease under Subsection (1), the Minister –
(3) The Minister shall not forfeit a lease under this section unless –
(4) Copies of a notice of forfeiture and a notice under Subsection (2)(a) or (b) shall be served on all persons who, to the knowledge of the Departmental Head, have or claim to have a right, title, estate or interest in, to or in relation to the land, or such of them as can with reasonable diligence be ascertained and found.

(5) No acceptance of rental by the State waives a right to forfeit a lease under this Act.

(6) For the purposes of this section the grant of an application for a State lease shall be deemed to be the grant of the lease."

The wording of this section is very plain. No room is hence, left for any argument as to the correct procedure to be followed before forfeiting a State Lease. It is clear that a State Lease can only be forfeited if any of the conditions enumerated under s. 122(1) of the Act exists. Where such factors exist, the Minister is required by s. 122(2) to serve a notice on the lessee calling on him to show cause within a specified period why the Lease should not be forfeited. Such a notice must specify the grounds relied on for the notice. The lessee may also be required to comply with covenants or conditions of the Lease and the other provisions of the Act within a specified period whether or not he shows cause as required by the notice. If after service of the notice to show cause, the lessee fails to comply with the notice or fails to show good cause why the lease should not be forfeited, than the Minister may forfeit the lease. This is apparent from s. 122(3). Copies of the notice to show cause and a forfeiture following that are required to be served on all persons who to the knowledge of the Departmental Head have or claim to have a right, title, estate or interest into or in relation to the land or such of them as can with reasonable diligence be ascertained and found.


The authorities say that, all statutory power has to be exercised strictly in line with the relevant statute. Unless, there is an adherence to the requirements of whatever the statute is, any purported exercise of statutory power is null and void and is liable to be set aside and or quashed. For authorities on that see: The Senior Stipendiary Magistrate, Ex parte The Acting Public Prosecutor [1976] PNGLR 344 at 349; Kiau Nekints v. Moki Rumints [1990] PNGLR 123 and ABCO Transport Pty Ltd v. Timothy Sakaip (unreported but numbered judgement of Injia J) N1577, Rabaul Shipping v. Rita Ruru (08/12/00) N2022, William Moses v.Otto Benal Magiten (01/12/00) N2023 and Sunga Andrew v. Helen John (19/01/01) N2031.


Hence for a valid forfeiture of a State Lease under s. 122 of the Act for non-compliance of improvement covenants and non-payment of rents the following facts must in fact exist:


  1. The State Lease must have an improvement covenant specifying a period for its compliance;
  2. The specified period including any extended period must have expired without the lessee carrying out the required improvements;
  3. The State Lease must specify the rents to be paid;
  4. There must in fact be a failure to pay the rents and they remain due and owing over a period of 6 months;
  5. The lessee must then be given notice to show cause why his Lease should not be forfeited for not meeting the improvement covenants within the required period and non-payment of rents for six months.
  6. The notice must specify the period within which the lessee must show cause.
  7. If the lessee fails to show cause within the period specified in the notice, the Minister could forfeit the lease.
  8. If cause is shown, the Minister must then consider whether the cause is a good one and if satisfied that the cause is not good, he could forfeit the lease.

Present Case


In the present case, the notice to show cause was dated 16th of March 2000. The notice was issued allegedly for non-compliance of improvement covenants and non-payment of rental up to a period of 6 months. The Appellant was given a period of one month from the date of the notice, to show cause why its Lease should not be forfeited. Going by the date of the notice, the Appellant had until 16th April 2000, to show cause. The Appellant did that by letter dated 13th April 2000 through its lawyers. It provided evidence that the improvement covenant period had not yet expired and that it has faithfully paid its rents. On the basis of that, the Appellant requested the First Respondent to withdraw or quash the notice to show cause.


Before the expiry of the one-month period given in the notice to show cause, the First Respondent forfeited the lease on 13th April 2000. The one-month period expired on or about 16th April 2000.


Further, under the original terms or conditions of the Lease, the Appellant was given 3 years from the date of the registration of the title to comply with improvement covenant. The title was registered with the Registrar of Titles on the 30th of May 1997. Accordingly, the 3 years period expired on or about the 30th of May 2000. In any event, by Gazettal No. G58 dated 31st July 1997 the initial 3 years period for improvements was relaxed and extended by a further 3 years period. Consequently, the improvement covenants were to expire on about 30th May 2003.


Furthermore, the evidence as presented by Appellant to the First Respondent in response to the show cause notice undercover of its letter dated 13th April 2000, show that all the rents were paid up to date. The first payment was in a sum of K100, 000.00 made on 16th May 1997 (Receipt No. 24245). That was followed by a K407, 816.43 payment on 29th May 1997 (Receipt No. 25286) and two lots of K40, 000.00 each on 29th April 1998 (Receipt No. 44158) and 23rd June 1999 (Receipt No. 66979). Hence, the Department issued a Land Lease Rental Record Reconciliation on 21st December 1999 confirm there was nothing outstanding in respect of the Lease.


On the evidence, I was satisfied that none of the factors under s. 122 of the Act as outlined above existed. The First Respondent therefore, had no good basis either on the facts or the law, namely, s. 122 of the Act to first issue the notice to show cause and later to forfeit the Appellant’s Lease. This was an instance of an abuse of power and acting contrary to the clear dictates of the law. Both those decisions were illegal and actions not authorised by s. 122 of the Act. Accordingly, they were both null and void and of no effect. I therefore, ordered them to be revoked and the parties return to the position they were at before those decisions were made.


Indeed s.123 of the Act provides that, where a forfeiture notice is revoke the revocation shall be treated as if the forfeiture has not occurred. This compliments section 142 of the Act more particularly subsection 3. That provision provides that, when there is an appeal under sub-s. 1, that renders the matter of complaint as having no effect until the National Court determines the appeal. In the meantime, a lessee may continue lawfully to occupy the land, the subject of the appeal and exercise his rights and fulfil his obligations under the lease.


The above in turn accords well with the well-accepted principal of law that a party pursuing a cause of action as the obligation to mitigate his loses. In my view, s. 142(3) gives a lessee the right to continue to occupy the land and to exercise his rights pending the determination of the appeal to minimise his loses or damages.
In view of the above, I refuse to grant further orders sort by the Appellant’s lawyer. He asked for orders that, his client be relieved of the rentals for the period the First Respondent precluded his client from occupying and enjoying the use of the land as a result of the forfeiture. Besides that order or relief was not pleaded and sought in the notice of appeal. Accordingly, it would have been unfair to the Respondent to allow the Appellant to get a relief not sought in the pleadings.


Costs


In its pleadings, the Appellant also sought an order for costs on a solicitor client basis. Counsel for the Appellant, Mr. Williams asked for costs to be ordered against the Respondent on a solicitor client basis. In so doing he pointed out to the fact that, costs were unnecessarily forced upon his client by the Respondents’ illegal action. The Respondent’s decision to forfeit the Lease was despite his client’s letter dated 13th April 2000 to the Secretary for Lands, which gave them the opportunity to correct the illegal action. The failure to correct the erroneous exercise of power necessitated the issue of the proceedings. Then even after the issue of the proceedings and the involvement of the state lawyers, the Respondents still failed to resolve the matter out of court. Once in Court and after the Appellant had made out its case, the Respondents conceded to the orders sought from the Court. Thus, it was only fair and reasonable that the Respondents should be ordered to reimburse the costs the Appellant was forced to incur unnecessarily.


Mr. Kua of counsel for the Respondents submitted that, whether or not costs should be ordered, and on what basis, is a matter within the Court’s discretion and asked the court to exercise that discretion as it sees fit in the circumstances of the case.


The law governing whether or not to order costs on a solicitor client basis is clear. Regard must always be had to the nature of the case. In Alex Latham v. Henry Peni and Kathleen Marie Latham v. Henry Peni N1463, Justice Doherty (as she then was) ordered costs on a solicitor client basis by having regard to the nature of the case. That was a case in which, the defendant on board an aircraft subjected the plaintiffs to assault and abuse. Those acts were unprovoked and were the acts of a drunkard.


The position taken by a party in the proceedings would also dictate whether or not costs should be ordered on a solicitor client basis. Where for example a defendant takes a defence that has no basis on the facts or the law and merely takes a token position, he may be ordered to pay costs on a solicitor client basis. Indeed in a situation like that, my brother Justice Sheehan ordered the Defendant to pay costs on a solicitor client basis in the case of Benny Balep v. The Commissioner of Police & The State (4/11/94) N1374. Sevua J. also took a similarly approached in Gulf Provincial Government –v- Baimuru Trading Pty Ltd (10/12/98) N1794. He did that after having found the proceedings brought by the plaintiff vexatious and an abuse of process. He ordered the plaintiff to pay the defendant’s costs on a solicitor client basis.


The Supreme Court took a similar approach in Pomb Pullie Polye –v- Jimson Saku Pepaki & Anor (31/05/00) SC637. There the Supreme Court was satisfied that it was appropriate and just to compensate the Respondents for the whole of the costs forced on him by the Applicant’s actions. The application was found as amounting to an abuse of process and hopeless in an event. The Court therefore, ordered the Applicant to pay the Respondents costs on a solicitor client basis.


What is apparent from the above line of cases is that, if an action is taken which has no merit or no basis in fact or law, the court may in the exercise of its discretion order costs to be paid on a solicitor client basis. Having regard to these principles, I found in this case that, the First Respondent had no basis either in fact or in law to issue firstly the notice to show cause and subsequently forfeit the Lease. Instead it was contrary to the clear dictates of s.122 of the Act. The Respondents were given an opportunity to reconsider and prevent further costs from being incurred, in the form of the Appellant’s reply to the show cause notice but no corrective steps were taken. The Respondents instead chose to allow the Appellant to go to court and incur costs unnecessarily only to concede to the orders sort at the hearing of the Appeal.


The situation did not improve when the State Lawyers came on board and entered an appearance for the Respondents. The lawyer having courage of the matter should have seriously looked at the relevant facts and the law on the matter and correctly advise the Respondents but it seems he failed to do that in the absences of any evidence to the contrary.


In all of the circumstances, I considered it only fair and reasonable that the Respondent should reimburse the Appellant’s costs on a solicitor client basis. I therefore made the orders I made on 5th of April 2001.


Conduct of Lawyer for the Respondents


I now return to the issue of the Respondent’s lawyer’s conduct. The failure of the lawyer, as noted above, amounted to a breach, in my view, of the provisions of the Lawyers Professional Conduct Rules, more particularly, s. 4(7). That provision reads:


"A lawyer shall, when in his client's best interests, seek his client's instructions to endeavour to reach a solution by settlement out of court rather than commence or continue legal proceedings."


A lawyer is thus charged with the duty to exercise reasonable care in the discharge of his duties. He must be diligent in carrying out his client’s instructions including the provision of appropriate advice and seek instructions with the view to reaching an out of court settlement rather than commence or continue legal proceedings.


Section 14 of the Professional Conduct Rules imposes a duty on a lawyer not to advise his client and engage in conduct, which the lawyer considers may be illegal. The only exception to that is to act in good faith and to advise his client of the consequences that may follow in pursuing a cause of action or line of defence that may be illegal.


In the present case, it was clearly illegal for the First Respondents to issue the show cause notice and subsequently forfeit the Lease. Therefore, the Respondent’s lawyer was duty bound to advise his clients to settle this matter out of court in the interest of saving costs. It seems they fail to do that. All of this has resulted in unnecessary costs to the Appellant. It is therefore only fair and reasonable that the Appellants costs should be fully reimbursed by the Respondents.


Further, as briefly noted above, Mr. Kua attend the call over on 7th of February 2000 with Mr. William for the Appellant and agreed to setting the matter down for trial on 5th April 2000. When the matter came up for hearing before me, he did not turn up in court at the appointed time of 9.30am. This necessitated a call from my Associate’s office to his office requiring his appearance in court. Some 45 minutes later, Mr. Kua turned up in court. His only explanation was that the lawyer having carriage of the matter was Mrs. Keile, who has since gone to Australia to under take further studies. That left the matter unattended and he was not aware of the matter coming before my court on the date set.


What Mr. Kua put to me indicated a case of the office of the Solicitor General not being properly organised. The State lawyers in all matters where they appear not to be ready have constantly run this kind of excuses. It is about time such conducts should end and that, that office should seriously devise and put in place procedure whereby all matters pending before the courts are adequately attended to by the available officers. It is not good enough to say there is too much work and not enough lawyers. Cases should be assign to each lawyer with the supervising lawyer having ultimate control in overseeing the running and conduct of each file. If an officer leaves, or is otherwise unable to attend to a matter, the officer-in-charge would then easily assign that to another lawyer.


Lawyers should know very well that, they personally owe a duty to the court as officers of the Courts and must be ready at all times to assist the Court when called upon instead of coming up will unreasonable excuses as is provided for by s.15 (4) of the Professional Conduct Rules. That provision reads in relevant parts:


"(4) A lawyers shall –

(a) act with due courtesy to the court before which he is appearing; and
(b) use his best and nerves to avoid unnecessary expenses and waste of the court’s time;
(c) ...
(d) ...
(e) subject to this rules, inform the court of any developments which affects the information already before the court;

In this case, Mr. Kua chose to keep the court waiting for 45 minutes. His purported excuse was admission of negligence and failure on his own part and that of the Solicitor General’s office. There has been too much of these excuses already as I said earlier. These have resulted in wastage of the courts’ time and have caused delays in the expeditious disposal of cases. Also, many cases have been allowed to go to trial without making real efforts toward settling matters out of court if possible to minimise costs and delay. This case is a clear demonstration of a matter been allow to go to trial without any legal basis to support the position taken by the State. This is not only unnecessarily wasting of the Appellant’s time and costs but also an unnecessarily taking up of the Court’s time which could have been utilize to help resolve other matters which have a real and genuine basis for a dispute.


The Courts are there only to help determine or resolve disputes the parties themselves can not resolve using the best of their endeavours. The Courts should be reserved for those matters that can not be resolved by the parties themselves. They should not be used for every dispute there is.


Lawyers should now seriously examine instructions they receive from their clients and explore the possibility of out of court settlements before resolving to court action or if court action has already been instituted allowing it to continue up to a trial. The Rules of the Court are now being seriously looked at toward encouraging more alternative ways of dispute resolution first before issuing proceedings or if already issued, before listing matters for trial. This will help and eliminate those matters that need not go to trial and are capable of out of court settlement. That will help minimize the delay in the dispensation of justice and the associated costs there to.


I now go on record of having warned Mr. Kua that the next time he keeps the court waiting he faces the risk of being cited for contempt. If despite this warning Mr. Kua engages in this type of conduct, I not hesitate to have him dealt with for contempt.
_______________________________________________________
Lawyers for the Appellant: Gadens
Lawyers for the Respondents: Solicitor General


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