Lo Kau Kun v. Cheung Yuk Yun
Read the full judgment text of HCA 152/2013 on BabelCite. This High Court CFI judgment was delivered on 24 February 2015.
1. The plaintiff and the defendant co‑habited and lived together from 1973 to 1993. They remained unmarried during this period. The defendant gave birth to their son in 1976.
Cited by 9 cases · Cites 3 cases
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HCA 152/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 152 OF 2013 _______________
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_______________ J U D G M E N T _______________ INTRODUCTION 1.The plaintiff and the defendant co‑habited and lived together from 1973 to 1993. They remained unmarried during this period. The defendant gave birth to their son in 1976. 2.This action involves the dispute between the parties on the beneficial ownership of two properties:
3.Although there is a dispute as to the circumstances under which the Macau property was purchased, there is no dispute between the parties that the plaintiff and the defendant hold the Macau property beneficially in equal shares. It is admitted by the defendant that the Macau property is held beneficially for the plaintiff and the defendant in equal shares. 4.The main dispute between the parties is on the beneficial ownership of the Hong Kong property. The plaintiff’s case is that it is held beneficially for the plaintiff and the defendant in equal shares. The defendant’s case is that it is held beneficially solely for the defendant. THE CLAIMS 5.The plaintiff seeks declaratory relief that the Hong Kong property and the Macau property are held beneficially by the plaintiff and the defendant in equal shares. The plaintiff also seeks an order for sale of the Hong Kong property under the Partition Ordinance (Cap 352). THE DEFENCE AND COUNTERCLAIM 6.By her defence and counterclaim, the defendant denies that the Hong Kong property is held beneficially for the plaintiff and the defendant in equal shares. Her case is that she is the sole beneficial owner of the Hong Kong property. By her counterclaim the defendant seeks a declaration that she is the sole beneficial owner of the Hong Kong property and for an order that the plaintiff do forthwith convey the same to her absolutely. 7.The Hong Kong property was purchased in the joint names of the plaintiff and the defendant. There is no dispute that both the plaintiff and the defendant were responsible for the repayment of the mortgage on the property with the Bank of East Asia as mortgagee, although it is the defendant’s case that she herself paid for the down payments for the purchase and all the mortgage payments for the Hong Kong property. THE ISSUES 8.The agreed issues are:
Issue (1) 9.In Stack v Dowden [2007] 2AC 432 it was held (Lord Neuberger dissenting) that where a domestic property was conveyed into the joint names of cohabitants without any declaration of trust there was a prima facie case that both the legal and beneficial interest in the property were joint and equal. The onus of proof lay upon any party seeking to establish that equity should not follow the law. Such a party had to prove that the parties had held a common intention that their beneficial interests be different from their legal interests, and in what way. In order to discern the parties’ common intention the court should look at the parties’ whole course of conduct in relation to the property. It was also held that the law had moved on from the presumption of resulting trust and many more factors other than the parties’ respective financial contributions might be relevant to divining their true intentions. When all relevant factors had been taken into account, cases in which the joint legal owners were to be taken to have intended that their beneficial interests should be different from their legal interests would be very unusual. 10.I would also refer to what Lord Walker said at paragraph 33 in Stack v Dowden (supra):
and also to what Baroness Hale said at paragraph 68:
11.Stack v Dowden was considered by the Supreme Court in Jones v Kernott [2012] 1 AC 776. At paragraph 51 Lord Walker and Baroness Hale said:
12.The common intention between the parties may be based on express discussions between them or inferred from their conduct. 13.I would also refer to what Deputy High Court Judge Eugene Fung SC said in Mo Ying v Brillex Development Ltd and another (HCA 111/2011, 5 May 2014) at paragraphs 37 to 40. 14.Each case, of course, depends on its own facts. 15.As accepted by Mr Liu, for the defendant, the onus is on the defendant to show that the beneficial ownership of the Hong Kong property is different from the legal ownership. The witnesses 16.I heard evidence from the plaintiff and the defendant. I also heard evidence from Ho I Leng (“Ho”), the defendant’s daughter. Background 17.The undisputed facts are that the plaintiff was born in 1937 and the defendant in 1942. They became romantically involved with each other in the early 1970s. 18.The plaintiff started working at a young age in the early 1950s in fishing boats in Macau and in Hong Kong. His father passed away in or around 1953. 19.The plaintiff found employment in 1965 as a sailor with the Hong Kong Macau Hydrofoil Company which was subsequently renamed Far East Hydrofoil Company (“the Hydrofoil Co”) which operated hydrofoil services between Macau and Hong Kong. 20.After a few years of working for the Hydrofoil Co the plaintiff obtained government housing from the Hong Kong Government and was provided with a unit at the public housing estate in Sau Mau Ping (“the Sau Mau Ping unit”). 21.The plaintiff lived in the Sau Mau Ping unit with his ex‑wife until she left him in the early 1970s. He had two daughters from his marriage with his ex‑wife. His mother who lived in Macau took care of his daughters and the plaintiff lived alone at the Sau Mau Ping unit in the early 1970s. 22.The defendant had previously been married to Ho Foon and they had a daughter Ho, who also gave evidence before me. During the time that she was married to Ho Foon, the defendant lived in Macau. She had also been working in Macau in a firecracker factory. 23.Ho Foon was a sailor working on cargo ships. Tragically he had a fatal accident on a voyage and died in the mid 1960s. After that the defendant and her daughter moved to live in Hong Kong. 24.During the early 1970s the defendant was working in a metal factory in Hong Kong making ornaments. 25.The plaintiff and the defendant started a relationship and became romantically involved with each other in the early 1970s. 26.The plaintiff and the defendant cohabited at the Sau Mau Ping unit. And in 1976, the defendant gave birth to their son. 27.The above facts are undisputed and I find them proved. 28.What is in dispute between the parties is the question of who paid for the purchase of the Macau property and the Hong Kong property, and what the intentions of the parties were at the time of purchase. The Macau property 29.There is a dispute of fact on the evidence between the plaintiff and the defendant on the circumstances in which the Macau property was purchased. I prefer the evidence of the plaintiff to the defendant on this dispute as I find his evidence credible and reliable. It was apparent from the defendant’s evidence that the defendant was confused about her recollection of events leading up to the purchase of the Macau property. 30.The plaintiff gave evidence that he owned another property in Macau situated at Flat B, 2nd Floor, 14 Rua de Leôncio Ferreira, Macau (“the Ferreira property”) which he had purchased in his sole name in the early 1970s by paying a down payment and taking out a mortgage. The purchase price was about HK$40,000. The Ferriera property was purchased for investment purposes and it was rented out. 31.The plaintiff sold the Ferriera property in or about 1978 for a profit of about HK$15,000. The plaintiff said that he used the proceeds of sale to pay the bulk of the down payment for the purchase of the Macau property. 32.The Macau property was a new property which was purchased in the plaintiff’s own name under a mortgage. Although he paid for the bulk of the down payment, the plaintiff was still short of funds at that time to make the full down payment for the purchase of the Macau property. According to the plaintiff, he borrowed HK$14,000 from the defendant’s sister through the defendant which he used for the down payment for the purchase of the Macau property. 33.The plaintiff also said that he repaid the defendant’s sister by instalments and that by the mid 1980s he had repaid about half of the amount he had borrowed. He said that the defendant told him that she would repay the remaining amount to her sister but that he should include her name to the title of the Macau property. He agreed to this and added her name to the title of the Macau property by way of gift. 34.The defendant denied that the plaintiff had borrowed the money from her sister for the down payment for the purchase of the Macau property. She said that she gave the plaintiff some money to buy a flat in Macau which she paid for in cash without taking out a mortgage. She could not remember when the purchase was made as she left it to the plaintiff to handle the purchase. Her evidence on these matters was confusing and unreliable. I prefer the evidence of the plaintiff to that of the defendant. 35.I find that the plaintiff purchased the Macau property in his own name in 1981 by paying the down payment from his own monies and with monies he had borrowed from the defendant’s sister. I also find that in 1986 he made a gift of half share in the Macau property to the defendant instead of repaying all of the monies he had borrowed from the defendant’s sister. The property registration documents for the Macau property shows that the property was purchased in the name of the plaintiff in 1981 and that in 1986 the plaintiff made a gift of half share in the Macau property to the defendant. 36.As I have said, there is no dispute that the Macau property in held in the joint names of the plaintiff and the defendant beneficially for the plaintiff and the defendant in equal shares. The Hong Kong property 37.The plaintiff’s case is that the down payments for the purchase price of the Hong Kong property were solely paid by him. His case is that the mortgage repayments were also paid by him solely by giving monthly sums to the defendant to make the mortgage repayments. The defendant’s case is that she solely paid for the down payments for the purchase of the Hong Kong property and the mortgage repayments. 38.The plaintiff gave evidence that when he started work at the Hydrofoil Co in 1965 he was earning a basic salary of HK$420 per month. He said that he gave 60% of that to his ex‑wife while she was living with him and that after she left him he continued to give 60% of his total income to support his daughters. 39.He also said that in the early 1970s his salary increased to about HK$1,000 per month and he continued to give 60% to support his daughters and his mother who were living in Macau. 40.The plaintiff said that apart from his salary he also earned extra income. Initially this was from selling beer and soft drinks on the hydrofoils. Later this included the selling of souvenirs on board. 41.The plaintiff said that in the 1980s his salary was about HK$4,000 to HK$5,000. However, when cross‑examined on the deposit of salary payments into his bank account amounting to HK$3,521 for his salary in February 1986, the plaintiff accepted that as being the correct amount of his salary at that time. He, however, said that he earned extra income from the sale of items on the hydrofoils. He estimated his total income at HK$10,000 to HK$12,000 in the 1980s. He said that in the 1990s his salary was about HK$10,000 per month but that he did not then have any additional income as he was no longer permitted to sell souvenirs on board. 42.It seems to me that the plaintiff has exaggerated the amount of money that he was earning in the 1980s. In my view, he has also exaggerated the amount of money that he gave the plaintiff during the 1970s and 1980s. I do not believe that his total income was about HK$10,000 to HK$12,000 per month in the 1980s. I do not believe that he gave the defendant as much as 60% of his total income in the range of about HK$7,000 per month. 43.The defendant was adamant that she paid for the down payments for the purchase of the Hong Kong property in 1984 out of her own savings. She also said that she had enough money to pay for the outright purchase of the Hong Kong property but took out a mortgage instead for the balance payment. 44.There is no dispute that the Hong Kong property was in an uncompleted building at the time of the purchase. 45.The purchase price was HK$311,400 and the Hong Kong property was purchased in the name of the plaintiff and the defendant as joint tenants. According to the Land Registry records, the formal sale and purchase agreement was entered into on 17 September 1984. The assignment of the Hong Kong property to the plaintiff and the defendant as joint tenants was dated 24 December 1985. The legal charge in favour of the Bank of East Asia was also dated 24 December 1985. 46.There is no dispute that the plaintiff and the defendant lived together at the Hong Kong property after that time until about 1993 when the plaintiff left the defendant. I shall return to this later when dealing with the question of adverse possession under issue (3). 47.The plaintiff said that he had used his savings to pay the down payments for the purchase of the Hong Kong property and took out a mortgage with the Bank of East Asia. The legal charge that was made on 24 December 1985 in favour of the Bank of East Asia was to secure the sum of HK$240,000 borrowed by the plaintiff and the defendant. This was the balance of the purchase price. There is no dispute that both the plaintiff and the defendant were liable to repay the Bank of East Asia under the legal charge. As the total purchase price was $311,400 and the amount of the mortgage loan was $240,000, the down payments amounted to HK$71,400. The legal charge in favour of the Bank of East Asia was discharged on 4 October 1993 when the mortgage loan was fully paid off. 48.The plaintiff and the defendant each said that they paid the down payments for the purchase of the Hong Kong property with their own monies. 49.The defendant also said that she did not need to take out a mortgage to pay for the Hong Kong property and that she could have paid the entire amount of the purchase price in one go in 1985. I do not believe the defendant. 50.I do not believe that the defendant had sufficient monies to pay for the entire purchase price of HK$311,400 in 1985 when the Hong Kong property was assigned or even to pay for the down payments of HK$71,400 for the Hong Kong property in 1984. 51.The defendant said in evidence that she would deposit most of her savings into her bank accounts. It is unlikely that the defendant had much money left over in cash which was not deposited into her bank accounts. 52.The defendant impressed me as being careful with her own monies in the different bank accounts that she had in the 1970s and 1980s. She has been careful to preserve her old bank savings passbooks which have been kept by her for all these years. She was cross‑examined about entries in her bank passbooks (Exhibits D1, D1A, D2, and D3). She also maintained a passbook for gold investments at HSBC (Exhibit D4) which was opened in 1987 with a zero balance in 1991. 53.It is clear from her evidence that in her different bank accounts the defendant had a total balance of about HK$30,000 in 1984 and 1985. The defendant agreed in evidence that her passbook with HSBC (Exhibit D1) showed an average balance of Hk$6,000 to HK$11,000 between 1984 and 1985, her passbook with Bank of Communication (Exhibit D2) showed an average balance of HK$10,000 to HK$12,000 and her passbook with Hang Seng Bank (Exhibit D3) showed an average of HK$9,000 to HK$11,000. The most that she had in her bank accounts was about HK$30,000 at that time. The defendant said, and I accept her evidence on this matter, that those three accounts comprised the majority of her savings between 1984 and 1985. 54.I do not believe the defendant when she said that she paid for the down payments amounting to HK$71,400 for the purchase of the Hong Kong property in 1984. I prefer the evidence of the plaintiff on this dispute of fact and find that it was the plaintiff and not the defendant who paid the down payments for the purchase of the Hong Kong property. 55.It is clear on Ho’s evidence that in about 1979 she worked as a cashier at a supermarket, then as a salesperson earning about HK$1,300 per month. She also worked part‑time in a factory and earned extra income of about HK$400 to HK$500. The defendant said that in the early 1980s Ho gave her a few hundred dollars per month and I accept her evidence on this. 56.Ho got married in 1984 and gave birth to her daughter in 1986. After she gave birth, Ho worked in a factory earning about HK$5,000 per month. In 1987 she changed jobs and was then earning a basic salary of HK$5,000. She also earned extra income of about HK$10,000 from her side business. I believe Ho and accept her evidence. 57.I am satisfied, on the defendant’s and Ho’s evidence, that in about 1987 Ho left her daughter with the defendant for her to look after. I am satisfied that the defendant looked after her granddaughter who stayed with her from about 1987 for about 10 odd years. During the time that the defendant looked after her granddaughter, I am satisfied and find that Ho did give her money on a monthly basis of about HK$6,000 to HK$7,000. The bank passbooks produced in evidence did not show all the monthly payments from Ho. I believe Ho when she said that she made these payments to her mother both by bank transfers and by cash from 1987 onwards up to the time Ho’s daughter went back to live with her. However, it is clear on the evidence, and I so find, that in 1984 and 1985 Ho had not commenced her monthly payments of about HK$6,000 to HK$7,000 to the defendant. 58.It was also the defendant’s case that she had received about HK$40,000 as the award for workmen’s compensation after her late husband’s death in 1966. It seems to me that, as Mr D’Souza, for the plaintiff, submitted, on the relevant legislation at the time of the award, it is highly unlikely that the defendant would have received anywhere close to HK$40,000 as the award for workmen’s compensation. It is highly likely that the award would have been the deceased’s monthly earnings of HK$360 x 36 months amounting HK$12,960 (section 6 of the then Workmen’s Compensation Ordinance, Cap 282). The defendant, however, said in evidence that she did not keep any of the workmen’s compensation award that she had received as she gave the entire compensation to her mother‑in‑law. I accept her evidence on this matter. 59.In 1987 the plaintiff and the defendant were still living together. The plaintiff said that he used to give her about HK$6,000 to HK$7,000 per month for household expenses and to pay the monthly mortgage payments to the Bank of East Asia. There is no dispute that the defendant kept the bank passbook of the account with the Bank of East Asia and that she made the monthly payments. She said that the mortgage repayments were all from her own monies. However, she also said in evidence that the plaintiff did give her some monies but that it was insufficient. 60.The bank passbook of the account with the Bank of East Asia has not been produced. It is not clear on the evidence what the monthly mortgage repayments to the Bank of East Asia were. From the defendant’s evidence, however, it was not as much as HK$2,000 per month. 61.I find that the plaintiff did give the defendant some monies every month for the household expenses and towards the repayment of the mortgage loan with the Bank of East Asia. However, as I have said, I do not believe that he gave her about HK$7,000 per month. It seems to me that both the plaintiff and the defendant did contribute to the repayment of the mortgage loan taken out from the Bank of East Asia. 62.The defendant confirmed in evidence that the mortgage was repaid in full after the plaintiff left the defendant in 1993. Exhibit D1A shows a withdrawal of HK$20,500 on 13 October 1993 and the defendant confirmed that this was used to pay the remaining balance of the mortgage loan. 63.It is also clear on the evidence that the parties did discuss their intentions when the Hong Kong property was purchased. 64.The plaintiff said that it was always their understanding that the Hong Kong property was to be held by the plaintiff and the defendant equally as part of their family’s assets and that the defendant knew this. The defendant confirmed in evidence that at the time of the purchase of the Hong Kong property she and the plaintiff intended to live there together for life. She also said, and I accept, that when the Hong Kong property was purchased she discussed with the plaintiff their intentions that it was to be part of their family’s assets which meant that the plaintiff, the defendant and their son would be living together at the Hong Kong property. 65.The defendant also gave evidence, which I accept, that the location of the Hong Kong property was also discussed with the plaintiff at the time of the purchase. The location was close to the plaintiff’s place of work at the Hydrofoil Co at the Macau Ferry Terminal. 66.Issue (1) is resolved in favour of the plaintiff. In my judgment there was a common intention constructive trust whereby the plaintiff and the defendant held the Hong Kong property beneficially in equal shares. Issue (2) 67.As I have held that there was a common intention constructive trust that the Hong Kong property be held beneficially by the plaintiff and the defendant in equal shares, the question of an express trust does not arise. 68.In any event, trusts are either express trusts or trusts arising by operation of law, such as constructive trusts. By section 5(1) of Conveyancing and Property Ordinance (Cap 219) it is provided that no equitable interest in land can be created or disposed of except in writing signed by the person creating or disposing of the same. There was no written express trust between the plaintiff and the defendant. There is, however, no requirement as to writing for the creation of a constructive trust (section 5(2) of Conveyancing and Property Ordinance). Issue (3) 69.By section 7(2) of the Limitation Ordinance (Cap 347) no action shall be brought by any other person to recover any land after the expiration of 12 years from the date on which the right of action accrued to him. Section 17 provides that subject to the provisions of section 10, at the expiration of the period prescribed by the Ordinance for any person to bring an action to recover land, the title of that person to the land shall be extinguished. 70.The defendant’s case is that at all material times since 1993 she has been in adverse possession of the Hong Kong property and that the title of the plaintiff had been extinguished by virtue of the Limitation Ordinance prior to the commencement of this action by the plaintiff. 71.It is important to bear in mind that the defendant has always been in lawful possession of the Hong Kong property and is not and has never been in unlawful possession as a squatter thereat. 72.The plaintiff and the defendant were joint tenants of the Hong Kong property which was assigned to them by the assignment dated 24 December 1985. By the notice to sever joint tenancy given by the plaintiff to the defendant dated 5 June 2012 the joint tenancy was severed and the Hong Kong property was then held by the plaintiff and the defendant as tenants in common in equal shares. 73.At common law, the unity of possession between co‑owners meant that if one joint tenant occupied the whole land this by itself was not adverse possession which would start time running. Some further act, such as ouster of the co‑owner was needed to start time running (paragraph 35‑042, Megarry and Wade’s “The Law of Real Property” 8th edn). 74.I was also referred to the report of the Law Reform Commission of Hong Kong on Adverse Possession dated October 2014 where it is stated:
75.There is no plea of ouster in the defence and counterclaim of the defendant in this case. Be that as it may, Mr Liu, for the defendant, submitted that the court should presume that there was ouster of the plaintiff by the defendant since 1993. He relied on Doe v Prosser (1774) 1 Cowp 217. He also relied on Lai Wai Kuen v Wong Shau Kwong [2004] 4 HKC 528 where the court presumed that there was ouster as there was a very long period where the defendant in that case did not have occupation or access to the property. 76.In my view Lai Wai Kuen and Prosser are clearly distinguishable and are of no assistance to the defendant. As the court recognized in Lai Wai Kuen, the circumstances under which the defendant ceased to have any dealings with the property in that case were very flimsy. The court was prepared to presume ouster in those circumstances. 77.In this case, the circumstances under which the plaintiff left the Hong Kong property are clear. The plaintiff said that at that time he had an argument with the defendant at the Hong Kong property over another woman. The defendant attacked him with a knife and he was screaming for help. The neighbours heard him and called the police. When the police arrived, they advised the plaintiff to leave the Hong Kong property as the defendant was emotional and was agitated. He took the advice of the police and left the Hong Kong property leaving all his belongings there including his clothes and bank statements. He did not return to the Hong Kong property since then. I would observe that the plaintiff was not challenged in cross‑examination on these matters. I believe the plaintiff and accept his evidence. 78.The plaintiff married his present wife formally in June 1994. He had known her since about 1983. The defendant knew about this relationship. On her evidence, the defendant knew that the plaintiff spent about one night a week with his present wife when he stayed overnight in Macau. 79.The plaintiff has two children from his relationship with his present wife who were born before he left the defendant in 1993. No doubt, his relationship with this other woman who later became his wife led to many arguments between the plaintiff and the defendant before he left in 1993. 80.The defendant accepted in evidence that when the plaintiff left the Hong Kong property he had left some of his clothing there. It is also clear that she kept the plaintiff’s bank passbook (Exhibit D5) for all these years. She was the party who made discovery of the same in these proceedings. 81.There is no evidence at all as to what the defendant did with the belongings of the defendant which were left at the Hong Kong property. There is also no evidence that she ever changed the locks at the Hong Kong property after the plaintiff left. 82.The plaintiff also gave evidence that in June 1999 he sought the advice of solicitors S T Poon & Co to obtain his half share in the Hong Kong property. The advice he received was that it was not necessary to make a claim for the half share as it was held in joint tenancy. The plaintiff relied on the receipt of S T Poon & Co, dated 11 June 1999 to refresh his memory of the advice sought from those solicitors. I believe the plaintiff. This shows that the plaintiff had never abandoned his title to the Hong Kong property. 83.I was also referred to the recent case of Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286 where the Court of Appeal considered whether there was adverse possession in respect of the land which was held by the parties as tenants in common. 84.It was held in Tang Tak Sum that the judge below erred in her finding on adverse possession. First, the starting point was that possession of one tenant in common in that capacity could never bar the other tenant in common, because such possession was not adverse to the other’s rights, but in support of their common title. The refusal by one to pay the other his share was not by itself sufficient, without denying title. Second, adverse possession required both factual possession with the appropriate degree of physical control and the requisite intention to possess. It was therefore necessary to prove actual ouster or dispossession. It was held on the facts of that case that there was no ouster or dispossession (see also Cheung JA at paragraphs 34 to 40). 85.The clear evidence in this case is that the plaintiff left the Hong Kong property on the advice of the police in 1993 leaving all his belongings there at the time. That evidence is undisputed. 86.In my judgment, the defendant has failed to prove that there was actual ouster or dispossession of the plaintiff from the Hong Kong property. I am not satisfied that there has been adverse possession by the defendant of the Hong Kong property since 1993 or 1994. 87.Issue (3) is resolved against the defendant. 88.As regards issue (4), the defendant does not dispute that the plaintiff would be entitled to an order for sale of the Hong Kong property in the event that the plaintiff succeeds on the question of common intention constructive trust and adverse possession. That being so, the plaintiff is entitled to an order for sale of the property with the proceeds being shared between the plaintiff and the defendant in equal shares. 89.I give judgment to the plaintiff against the defendant for:
90.The counterclaim is dismissed. 91.With a view to saving further legal costs in this matter, the parties should endeavour to agree the consequential directions pursuant to the order for sale of the Hong Kong property. In the event that the parties are unable to agree such consequential directions, I give liberty to apply for such consequential directions. 92.I also make an order nisi that the costs of the action and the counterclaim be paid by the defendant to the plaintiff, such costs to be taxed if not agreed.
Mr Robin Gregory D’Souza, instructed by Paul W Tse, for the plaintiff Mr Kelvin KH Liu, instructed by Lam and Lai, for the defendant | |||||||||||||||||||
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