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All Purpose Enterprises Pty Ltd v Brotherson[2004] QDC 62

All Purpose Enterprises Pty Ltd v Brotherson[2004] QDC 62

 

DISTRICT COURT OF QUEENSLAND

 

CITATION:

All Purpose Enterprises P/L v  Brotherson [2004] QDC 062

PARTIES:

ALL PURPOSE ENTERPRISES PTY LTD

ACN 010 084 367 Applicant v CHRISTIAN ROBERT BROTHERSON Respondent

FILE NO:

BD 4256/03

DIVISION:

Civil

PROCEEDING:

Originating application

ORIGINATING COURT:

District Court of Queensland at Brisbane

DELIVERED ON:

16 February 2004

DELIVERED AT:

Brisbane

HEARING DATE:

21 January 2004

JUDGE:

Alan Wilson SC, DCJ

ORDER:

Application dismissed

CATCHWORDS:

TRADE AND COMMERCE – RESTRAINT OF TRADE – VALIDITY AND REASONABLENESS – whether a restraint clause in an employment agreement sufficiently certain in its terms – whether reasonable in extent and duration – relevant principles

CONTRACT – CONTRACT FOR SERVICES – TERMINATION OF CONTRACT – whether party in breach of contract – whether notice of termination given under contract

COUNSEL:

Mr B Clarke for the applicant

Mr M Plunkett for the respondent

SOLICITORS:

Keith Scott & Associates for the applicant

Hall Payne Lawyers for the respondent

  1. [1]
    The applicant All Purpose conducts a courier, taxi truck, parcel delivery, heavy transport and removal business. Under an agreement dated 27 November 1998 (‘the agreement’) it engaged the respondent Mr Brotherson as a contract driver in that business, using his own vehicle but working at the applicant’s direction and providing services for its customers. In the course of that work the respondent performed substantial duties, on the applicant’s behalf, with a company called Boise Cascade Office Products BN 6218532 (Boise).
  1. [2]
    The agreement between the applicant and the respondent came to an end on a disputed date in March, April or May 2003. On 10 November 2003 Boise and the respondent entered into a contract under which the latter performed delivery services for Boise. The applicant seeks final injunctive relief preventing the respondent from doing that work, which it alleges is a breach of a restraint of trade clause (clause 7) contained in the agreement; and, damages. Interlocutory relief was also sought but, as the parties agreed all issues could be fully canvassed in the Applications Court, and the respondent undertook to preserve his financial books and records, the latter was not pursued. At the hearing the respondent was cross-examined. Otherwise, all evidence was by affidavit.
  1. [3]
    In its amended originating application the applicant seeks a final injunction restraining the respondent from soliciting or performing any work for Boise until 9 April 2006, or 2005, or 2004. The claim for alternate relief is not surprising in light of the terms of the restraint of trade clause which is of a ‘cascading’ kind, and reads:
  1. RESTRAINT

The Independent Contractor and the Guarantor and each of them shall not (except that allocated to the Independent Contractor pursuant to the terms of this Agreement):-

  1. (a)
    (i)perform either directly or indirectly or as servant or agent for any other person or corporation carrying work on behalf of the Special Client;
  1. (ii)
    perform either directly or indirectly and whether as servant or agent for any other person carrying work for regular clients of All Purpose;
  1. (iii)
    procure or solicit or encourage any other person to procure or solicit the custom of any regular clients of All Purpose;
  2. (iv)
    procure or solicit or encourage any other person to procure or solicit carrying work on behalf of the Special Client;
  1. (b)
    (i) during the term of this Agreement;
  1. (ii)
    for a period of six (6) months after the termination of this Agreement;
  1. (iii)
    for a period of one (1) year after the termination of this Agreement;
  2. (iv)
    for a period of two (2) years after the termination of this Agreement;
  3. (v)
    for a period of three (3) years after the termination of this Agreement;
  1. (c)
    (i)within a radius of 20 kilometres of the intersection of Reginald and Boundary Street, Rocklea in the State of   Queensland;
  1. (ii)
    within a radius of 50 kilometres of the intersection of Reginald and Boundary Streets, Rocklea in the State of Queensland;
  1. (iii)
    within a radius of 100 kilometres of the intersection of Reginald and Boundary Streets, Rocklea in the State of Queensland;
  2. (iv)
    within a radius of 150 kilometres of the intersection of Reginald and Boundary Streets, Rocklea in the State of Queensland;
  3. (v)
    within a radius of 200 kilometres of the intersection of Reginald and Boundary Streets, Rocklea in the State of Queensland.

This clause shall be construed and have effect as if it were a number of separate sub-clauses which results from combining the commencement of this clause with each sub-paragraph of paragraph (a) and combining each such combination with each sub-paragraph (b) and combining each such combination with each sub-paragraph (c), each such resulting sub-clause being severable from each other such resulting sub-clause, and it is agreed that if any of such separate resulting sub-clauses shall be invalid or unenforceable for any reason such invalidity or unenforceability shall not prejudice or in any way affect the validity or enforceability of any other such resulting sub-clause.  The term “regular clients of All Purpose” shall mean and include:-

  1. (d)
    Clients who have engaged the services of All Purpose for carrying work during the period of two (2) months preceding the date of termination of this Agreement or where it is alleged a breach of this clause has occurred during the currency of this Agreement the term shall mean any client who shall have engaged All Purpose for carrying work at any time during the period of two (2) months preceding the alleged date of breach; and
  1. (e)
    The total of invoices from All Purpose to such client in respect of carrying work for such period of two (2) months as aforesaid equals or exceeds the sum of $1,500.00; and
  1. (f)
    Twenty per centum (20%) of the payment by All Purpose to the Independent Contractor during such period of two (2) months as aforesaid were derived from carrying work performed on behalf of such client.
  1. [4]
    The respondent conceded that at all material times Boise was a “regular client of All Purpose” as that term is defined in sub-clauses 7(d), (e), and (f).
  1. [5]
    A preliminary issue arises: the respondent contends the applicant repudiated the agreement on either 14 or 27 March, or 1 or 9 April 2003; that he accepted the repudiation and elected to rescind; and, as a consequence, he is no longer bound by the contract. The different dates reflect occasions of written or oral contact between the parties.
  1. [6]
    Clause 4 of the agreement provided that it would remain in force until terminated by a month’s notice in writing from the respondent (4.2), or 7 days from the applicant (4.3(i)); or without notice from either if the respondent thought the applicant was in breach, or the latter was not satisfied with the respondent’s ‘performance’ (4.3(ii)).
  1. [7]
    The respondent was a party to the agreement in his own right. On 14 March 2003 the applicant’s General Manager, Mr Paul Kahlert wrote to the respondent noting that his business was being conducted on a “sole trader” basis (a reference to the fact the respondent did not trade through a separate entity) and advising that recent changes in government policy and insurance liability “… have created a situation whereas your sole trader status must change immediately … effective from 1 April this year All Purpose Transport will not longer be able to engage the services of contractors with sole trader status”.  The letter went on to suggest alternate structures, recommended the respondent seek immediate advice from his accountant, and take prompt action to “… change from your sole trader status”.  The respondent was asked to provide his “changed ABN details before 1 April to ensure that we update our records”. 
  1. [8]
    On 19 March the respondent replied by letter to Mr Kahlert advising that he had “… no interest in changing my current situation ie; contracting as a sole trader”.  On 27 March Mr Kahlert wrote to the respondent noting that he still appeared to be a “sole trader” and asking for details of his new ABN number.  The letter contained this paragraph:

Unfortunately we have received advice from our accountants that we can no longer continue our contractual relationship with sole traders after the April deadline.  (I understand that the process may take time, however, please contact me to update the status of your application.)

  1. [9]
    The respondent did not change his position on or before 1 April. Indeed, as he said in both his affidavit and oral evidence he had a telephone conversation with Mr Kahlert on 9 April when he reaffirmed that he had “… no intention of changing my status”.  He said, and I also accept, that Kahlert replied with words to the effect that the applicant had no alternative but to terminate his contract and a letter regarding this termination would follow.  The respondent says he believed, not unreasonably, that the contract was at an end.  On 11 April he went away on pre-arranged annual leave for two weeks.  When he returned he had went to the applicant’s premises on 28 April to return his two-way radio and data which he had utilised in his work with the applicant.  He says that on about 30 April he had another telephone conversation with Kahlert and told him that he had handed in his radio and data, but had not yet received a letter of termination.  He says Kahlert abused him and hung up on him but rang back a few minutes later and said that “… a letter of termination was out of the question and that if I wanted to leave APT I would have to give him a letter of resignation”. 
  1. [10]
    On that day, 30 April 2003 the respondent consulted solicitors who wrote to the applicant saying, relevantly:

Our client has instructed us to notify you that he accepts the termination of the independent contractor agreement dated 27 November 1998 in accordance with clause 4.3(ii), given verbally by Paul Kahlert on 9 April 2003 in a telephone conversation with Christian.

In accordance with clause 8.4 we request that the bond be refunded to Christian three months from the termination of the agreement, being 9 July 2003 together with interest on the bond from the date it was paid in full, being 21 January 1999 in accordance with clause 8.5 of agreement.

  1. [11]
    Mr Kahlert replied to this letter on 8 May 2003 saying:

I dispute there has been a verbal termination of the agreement with your client in accordance with clause 4.3(ii).

In any event it is our written company policy that any termination of our contractors, or by our contractors, is undertaken in writing and to this end no correspondence has been sent by either party.

If, however, your client wishes to terminate his independent contractor agreement with All Purposes Enterprises Pty Ltd may I respectfully suggest that he does so in writing in accordance with clause 4.2.

Until such time as the agreement with your client is terminated I regard him as being bound by the agreement.

  1. [12]
    On 9 May 2003 Mr Brotherson delivered a letter to the applicant simply saying:

As from today 9.5.2003 I’m resigning from All Purpose TPT

  1. [13]
    During his oral evidence the respondent said, and I accept, that he engaged solicitors because of his confusion about what Mr Kahlert had said to him concerning the termination of the agreement, and the fact that he had not received a letter of termination; and, that he was concerned about obtaining a refund of a bond he had paid under the contract. The bond was later repaid to him; and, otherwise, the last payment under the contract by the applicant to the respondent was on 11 April 2003.
  1. [14]
    The correspondence from the applicant of 14 and 27 March clearly evinced an intention to terminate the agreement (and, by implication, contained an offer to enter into a new one with a new legal entity representing the respondent) but does not suggest either breach, or anticipatory breach in the traditional sense of a failure to perform, or some other contractual sin. The letters simply gave notice the agreement would come to an end, albeit with a simultaneous offer of a new contract involving different parties – a novation, discharging the old one[1]
  1. [15]
    In light of clause 4, the applicant’s letter of 14 March is properly categorised as a notice under clause 4.3(i), advising the respondent the agreement would be terminated on 1 April (with a simultaneous offer to novate). Under that sub-clause the applicant had the right to terminate, without reason, on at least 7 days notice. The respondent’s conduct, save for his solicitor’s letters, is consistent with his acceptance of termination – ie, that the agreement was at an end. Once that is understood, the subsequent communications show nothing more than confusion, on the part of each party, about their respective positions under the agreement and are for that reason ineffectual, and irrelevant to the contractual position of either. The letter of 30 April from the respondent’s solicitors is mistaken when it refers to a verbal termination on 9 April; and, Mr Kahlert’s letter of 8 May is wrong when it asserts there had been no termination in writing, and that until the respondent did so the agreement was on foot. It follows the agreement came to an end on 1 April 2003.
  1. [16]
    Clause 7 requires the combination of several variables and results in several covenants which overlap in space, and time. The respondent submitted that, on its widest possible interpretation, it would permit of 125 separate permutations and combinations of overlapping variable covenants. This type of clause contains an implicit acknowledgement that the parties are themselves unsure about the proper dimensions of an appropriate constraint, and they present alternatives to themselves and the court on the assumption the latter will, if necessary, choose between the various combinations. This course has been rejected, or criticised from time to time[2], but in JQAT Pty Limited v Storm (1987) 1 Qd R 162 (FC) the court was prepared to find certainty, in the face of 18 possible combinations of restraint, where the terms of the covenant were clear (although the individual restraints might overlap, and be cumulative).
  1. [17]
    In Lloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 17 FCR 505 a clause to similar effect was held not to lack certainty, or to be void as contrary to public policy by Spender J where it announced a clear intention that all combinations would apply, subject to severance of any which became invalid or unenforceable, and where it could be seen that the parties had made a genuine attempt to define the covenantees’s need for protection (and the case was not one where the exercise of making the contract had simply been left to the court).  Spender did remark, however, that the more numerous the variables and the more mechanical and indiscriminate the combinations, the more likely it is that the parties have left it to the court to make the contract[3].  In the case he was considering, the restraint clause contained 120 possible combinations[4].
  1. [18]
    Here, clause 7 does reflect an attempt by the parties to discriminate between different types of client[5] and contains an express statement to the effect that it is to operate in the manner of separate covenants consisting of combinations.  The respondent is then subject to all of them, but also subject to the possibility of having some of them severed as unreasonable, something the clause itself anticipates[6].  The application of the tests adopted by Spender J, which I accept with respect are apposite, points to the same conclusion here.
  1. [19]
    It is then necessary to decide what, if any, restraint is appropriate. In its amended originating application the applicant contends the respondent should be restrained from performing work for Boise for one, two or three years (from 9 April 2004). The respondent contends, and I accept, that he did not solicit this work and between April and November he worked for some other contractors/employers and had periods of unemployment before he was approached by a representative of Boise. This negatives any breach of clause 7(a)(iii) but, if the work was undertaken within a period or area prohibited by 7(b) or (c), it offends 7(a)(ii).
  1. [20]
    The general principles of the common law as to the validity of restraints of this kind are well known, and summarised in the cases[7].  The test of reasonableness is one measured by determining legitimate interests of the applicant which it was entitled to protect, and then to decide whether the restraints were more than adequate for that purpose[8].    Here, the evidence established that in the course of his work under the agreement for the applicant, the respondent had been doing courier work for Boise for some years and from about July 2000 the respondent undertook some of that work.  In September 2001 Boise asked the applicant to assign the respondent to its courier work, full time and thereafter, with the exception of one client, all income for the applicant from the respondent’s work related to Boise.  I accept that during his employment with the applicant the respondent got to know Boise, its staff, and clients.
  1. [21]
    At the same time there is nothing in the nature of the applicant’s business which has been established as warranting special protection. There are no trade secrets, special knowledge, particular products, or unique systems or pricing structures or other information acquired by the respondent. The business involved is simply driving a vehicle, and delivery. As Muir J remarked in Artcraft Pty Ltd v Chandler [2003] QSC 102 at para [32], any person possessed of a modicum of common sense, and business experience would readily ascertain what the respondent learnt from  Boise during his contract with the applicant.  Further, the enterprise sought to be protected is nothing more complex than a general carrier’s business involving the delivery of goods in the metropolitan area of Brisbane.  The respondent gave evidence and I accept that another driver performed work for the applicant collecting parcels from Boise and delivering them to the Royal Brisbane Hospital warehouse, where the warehouse would deliver them to individuals.  The work the respondent now performs is “desktop” delivery.  That is the only material change. 
  1. [22]
    Other aspects of the relevant context include the remuneration level under the contract, and the notice period. Here notice could be instantaneous, or by seven days from the applicant[9].  The mere existence of a relationship between the respondent and the customer’s employees is irrelevant for present purposes unless it gives rise to an appreciable risk that, because of the relationship customers might transfer allegiance or give another party, including the respondent, business which would otherwise have gone to the applicant.  The evidence from the applicant here shows that in the months commencing on 10 January, 10 February, 10 March and 10 April 2003 Boise engaged the applicant to do courier work to a value of about $25,000 per month.  An affidavit from the applicant’s manager showing fortnightly figures between early December 2002 and 9 January 2004 suggests the volume of work Boise gave the applicant declined toward the end of May 2003, some weeks after the respondent ceased to perform contract work, and has remained at about the same level through to the present time – which includes, of course, the period when the respondent worked for neither.
  1. [23]
    There is no evidence the applicant was ever entitled to an expectation that it would receive, and forever retain, work from Boise. Indeed, there was an occasion in 1998-99 when Boise transferred most of its courier business and other transport requirements to another company. It was also, I accept, Boise which found and attracted the respondent to work for it late last year and he did not solicit that work from it.
  1. [24]
    The nature of the protection to which an employer might be entitled, in these circumstances, was considered by Muir J in Artcraft Pty Ltd v Chandler [10]

[25] Warrington LJ in Dewes v Fitch (1920) 2 Ch 159 at 181 discussed the nature of the protection to which an employer is entitled as follows –

… the employer is not entitled to require protection against mere competition. What he is entitled to protection against is the use by the employee against him in his business of knowledge obtained by him of his employer’s affairs and the influence acquired by him over his customers in the course of ordinary trade, and, in the case of a professional man, over what is more commonly called his clients.  Lord Parker put it in this way:  ‘I cannot find any case in which a covenant against competition by a servant or apprentice has, as such, ever been upheld by the Court.  Wherever such covenants have been upheld it has been on the ground, not that the servant or apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge of and influence over the customers of his employer, or such an acquaintance with his employer’s trade secrets as would enable him, if competition were allowed, to take advantage of his employer’s trade connection or utilize information confidentially obtained.’

[26] Some further elaboration of the nature of the protection to which an employee is entitled is given in the following passage from the reasons of the Court in Woodmason’s Melrose Dairy Pty Ltd v Kimpton [1924] VLR 475 at 480, 481, quoted by Kitto J with approval in Linder v Murdock’s Garage [1950] 83 CLR 628 at 655 –

There are many methods of enticing away customers beside the method of direct solicitation impossible of detection, and only known by results.  But, apart altogether from any conscious exercise by the former employee of such knowledge and influence as he may have acquired in his former employment, the employer is entitled to protect himself against loss which may otherwise arise from the mere existence of a personal relation between his customers and his former servant.  That relation, when resulting from the employment, is an advantage accruing to the employer and properly exercisable for his benefit so long as the service continues.  The same relation would become a source of injury to the employer if the former servant were permitted to accept the custom which might voluntarily flow to him upon his opening an opposition business in the old locality.  This danger is quite reasonably met, in our opinion, by a provision against serving the old customers for a limited period.  The same reasoning is, we think, fully recognized by the common acceptance of a covenant against carrying on a rival business at all in a given locality.  Such a covenant has been repeatedly held to be reasonable, though it obviously has nothing to do with solicitation.

  1. [25]
    At para [34], Muir J said:

The existence of the relationship between the respondent and the customer’s employees in my view is irrelevant for present purposes unless it gives rise to an appreciable risk that, because of their employee’s relationship with the respondent, customers will transfer allegiance to his new employer or give that employer orders which otherwise would have gone to the applicant.

[36]   Persons in the position of the applicant build up links with customer’s employees as part of the process of ensuring courteous efficient and friendly service.  Such relationships are capable of generating additional business only insofar as they assist in maintaining the employer’s reputation for reliability, efficiency and courtesy.  But it does not follow that the mere existence of these links or relationships creates the opportunity for the employee to take advantage of them in order to benefit a new employer.

  1. [26]
    Here, the applicant’s complaint is, in essence, that the respondent has by reason of his previous work with Boise built up a special relationship with that company. So much may be true but that is not a satisfactory premise for a conclusion that the proposed restraints are necessary, or reasonable. Relationships of this kind are an inevitable adjunct of the choice the applicant made to assign the respondent exclusively to Boise’s work. That is, at most, simply a sensible business practice.
  1. [27]
    At the same time clause 7 might be said to reflect an acknowledgement of just that kind of event – what the applicant described as its “customer connection” with a ‘regular client’. Frequent, regular and extended contact between the respondent and the applicant’s client made it necessary, the applicant contended, for it to have special protection from consequences which (by inference) might adversely affect the amount of business it obtained from Boise.  Ultimately, it is I think possible to describe these as legitimate interests and the existence of a restraint with appropriate limits as to area and time is not, then, unreasonable.
  1. [28]
    It is then necessary to determine the reasonableness of the proposed restraints, by reference to those criteria. All relevant distances involving the applicant, Boise, and the work the respondent performs at Royal Brisbane Hospital are within a radius of 20 kilometres and in light of the nature of the work the respondent performed under the contract that is the appropriate dimension: clause 7(c)(i). I did not understand Mr Clarke, for the applicant, to argue otherwise.
  1. [29]
    As to time, the applicant ultimately contended that a year at least was a reasonable period. This is a matter to be determined on a broad and commonsense view[11], and the test is sometimes applied by asking whether the restraint is no longer than is necessary for the employer to put a new person in the job and for that new employee to have a reasonable opportunity to demonstrate the qualities the customer requires[12].
  1. [30]
    In the context of the relevant elements including the nature of the applicant’s business, the history of contractual relations between it and the respondent, the terms of their agreement and the nature of the respondent’s work under it, a period of six months (the minimum under clause 7 (b)) is, in my view, more than adequate here. It allowed the applicant sufficient time to assign a new person to the applicant’s work with Boise, and for that worker to establish relations with Boise staff to the satisfactory level apparently attained by the respondent.
  1. [31]
    That period commenced to run when the agreement between the parties came to an end on, as determined, 1 April 2003. A restraint for 6 months expired, then, on 1 October.
  1. [32]
    The restraint which was reasonable had expired by the time the respondent began with Boise. The application is therefore dismissed. I will hear submissions about costs.

Footnotes

[1] Vickery v Woods (1952) 85 CLR 336, at 344, 345, and 349

         [2] Austra Tanks Pty Ltd v Running (1982) 2 NSWLR 840; Schindler Lifts (Australia) Pty Ltd v Debelak (1989) 89 ALR 275, per Pincus J at 306

[3] Lloyds Ships v Davros (supra) at 523

[4] ibid, at 518

[5] “Special Client” is defined in clause 1, and “regular clients of All Purpose” in clause 7

[6] Lloyds Ships v Davros (supra) at 520

         [7] Drake Personnel Ltd v Beddison (1979) VR 13; Smith v Ryngiel (1988) 1 Qd R 179 (per Ryan J at 183-184); and, generally Heydon “The Restraint of Trade Doctrine” 2nd Ed (1998) at 87-96

[8] Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 at 315 per Gibbs J; Bridge v Deacons (1984) 2 WLR 837

[9] Gledhow Auto Parts v Delaney (1965) 1 WLR 1366

[10] Supra

[11] Stenhouse Australia Ltd v Phillips [1974] AC 391 per Lord Wilberforce at 402

[12] Heydon, The Restraint of Trade Doctrine,(Butterworths, Sydney, 1999) 2nd Ed at 130, and the cases cited there

Close

Editorial Notes

  • Published Case Name:

    All Purpose Enterprises P/L v Brotherson

  • Shortened Case Name:

    All Purpose Enterprises Pty Ltd v Brotherson

  • MNC:

    [2004] QDC 62

  • Court:

    QDC

  • Judge(s):

    Wilson DCJ

  • Date:

    16 Feb 2004

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288
1 citation
Artcraft Pty Ltd v Chandler [2003] QSC 102
2 citations
Austra Tanks Pty Ltd v Running (1982) 2 NSWLR 840
1 citation
Bridge v Deacons (1984) 2 WLR 837
1 citation
Dewes v Fitch (1920) 2 Ch 159
1 citation
Drake Personnel Ltd v Beddison (1979) VR 13
1 citation
Gledhow Autoparts v Delaney (1965) 1 WLR 1366
1 citation
JQAT Pty Limited v Storm (1987) 1 Qd R 162
1 citation
Lindner v Murdock's Garage (1950) 83 CLR 628
1 citation
Lloyd's Ships Holdings Pty Ltd v Davros Pty Ltd (1987) 17 FCR 505
4 citations
Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275
1 citation
Smith v Ryngiel[1988] 1 Qd R 179; [1987] QSC 129
1 citation
Stenhouse Australia Ltd v Phillips (1974) AC 391
1 citation
Vickery v Woods (1952) 85 CLR 336
1 citation
Woodmason's Melrose Dairy Pty Ltd v Kimpton [1924] VLR 475
1 citation

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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