Construction

Overview

A recognized leader in construction law, Lavery ranks among the most recommended firms in this field in The Canadian Legal Lexpert® Directory, and many members of our team are listed as leading practitioners in this field by The Best Lawyers in Canada.

For more than forty years, our lawyers have been placing their expertise at the service of stakeholders in the construction industry. Should problems arise, we defend their interests either before the courts or via alternative dispute resolution methods (ADRM). The skills and know-how of our construction lawyers are complemented by those of our experts specialized in real estate law, project financing, public-private partnerships, and energy infrastructure.

Services

  • Advice concerning construction and project management
  • Regulatory compliance (zoning, urban planning, environment, CSST, CCQ, RBQ and BSDQ)
  • Negotiate and draft construction-related contracts (ex. fixed-priced contracts, E.P.C., E.P.C.M., PPP)
  • Prepare calls for tenders
  • Review tender compliance and resolve disputes concerning the tendering process
  • Contractual follow-up during construction
  • File construction liens
  • Draft claims for damages, impact costs, and delays
  • Develop strategies in case of default or other difficulties arising during construction
  • Construction litigation
  • Professional liability (architects, engineers, surveyors)
  • Remedies in case of breach of contract, construction defects, or latent defects
  • Advice regarding bankruptcy, insolvency, and corporate reorganization
  • Resolve construction issues involving condominiums
  • Arbitration and mediation
  • Strategic advice regarding the application and interpretation of the Act Respecting Labour Relations, Vocational Training, and Workforce Management in the Construction Industry (Act R-20)
  • Advice regarding the application and interpretation of collective agreements in the construction industry
  • Advice regarding regulations governing the obtaining of permits and licenses from the Régie du bâtiment

Canadian Legal Lexpert Directory

  1. Bill 37: What changes can be expected for Public Contracts?

    On September 18, 2019, the Minister Responsible for Government Administration and Chair of the Conseil du trésor introduced Bill 37, An Act mainly to establish the Centre d’acquisitions gouvernementales et Infrastructures technologiques Québec1 As its name suggests, this bill is intended to implement the restructuring of government procurement announced in the 2019–2020 budget2. If the bill is passed, the Centre de services partagés du Québec (CSPQ), as well as some other procurement organizations, will be replaced by two bodies: the Centre d’acquisitions gouvernementales will be the organization responsible for meeting the government’s general procurement needs, and Infrastructures technologiques Québec will handle its digital procurement. In 2017–2018, information technology contracts accounted for 17% of public body contracts3. Some administrative functions of the CSPQ would also be transferred to the Agence du revenu du Québec and the Conseil du trésor. Bill 37 also makes a number of amendments to the Act respecting contracting by public bodies, CQLR c. C-65.1, and its regulations, two of which are noteworthy. It is planned that, as of April 1, 2020, information relating to contracts involving an expenditure of more than $10,000, whether reached by mutual agreement or following a call for tenders, will have to be published in the electronic tendering system. The current limit is $25,0004. The bill also provides that, as of the date its assent (currently scheduled for the end of 2019), the imposition of a penalty for a final reassessment under the general anti-avoidance rule regarding an abusive tax avoidance transaction5 on the part of a company or related person will be recorded in the Register of Enterprises Ineligible for Public Contracts for five years. Such penalties will also be considered by the Autorité des marchés publics in its decision to authorize a contract with a public body. A 60-day transitional period is provided for in Bill 37, during which a taxpayer may make a late preventive disclosure to the Minister of Revenue6 by filing the form Mandatory or preventive disclosure of tax planning (TP-1079.DI-V). However, this type of disclosure will not be accepted if an audit by the Agence du revenu du Québec or the Canada Revenue Agency is already ongoing with respect to such a transaction. This measure is part of the current fight against aggressive tax planning7.   Quebec (National Assembly), Bill 37, An Act mainly to establish the Centre d’acquisitionsgouvernementales and Infrastructures technologiques Québec, 42nd Legislature, 1st Session. Quebec (Conseil du trésor), 2019–2020 Budget Plan (Quebec, Off. Publ., March 2019), p. H.61. Québec (Conseil du trésor), Statistiques sur les contrats des organismes publics 2017–2018 (Québec, Direction de la reddition de comptes et du soutien à l’encadrement des contrats publics, March 2019), p. 1. Sections 22 and 23 of the Act respecting contracting by public bodies, CQLR c. C-65.1; sections 39 and 39.2 of the Regulation respecting supply contracts of public bodies, CQLR c. C-65.1, r. 2; sections 52 and 52.2 of the Regulation respecting service contracts of public bodies, CQLR c. C-65.1, r. 4; sections 42 and 42.2 of the Regulation respecting construction contracts of public bodies, CQLR c. C-65.1, r. 5; sections 73 and 75 of the Regulation respecting contracting by public bodies in the field of information technologies, CQLR c. C-65.1, r. 5.1. Sections 1079.13.1 and 1079.13.2 of the Taxation Act, CQLR c. I-3. Section 1079.8.7.1 of the Taxation Act, CQLR c. I-3. See, in particular, Quebec (Conseil du trésor), 2019–2020 Budget Plan (Quebec, Off. Publ., March 2019), p. D.81.

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  2. How subcontractors or materials supplier can use the surety bond contract

    That is what material suppliers want to know when general contractors with which they have contracted default on payment, particularly in bankruptcy cases. It is common practice for clients to require that the general contractor provide a surety bond to cover a significant breach of this nature. Generally speaking, the purpose of a surety bond contract to cover payment for labour and materials is to guarantee that the workers, suppliers and subcontractors used by the general contractor are paid.1 In order to benefit from the protection provided by the surety bond, a claimant must disclose its contract to the surety, usually within 60 days from the date on which the claimant commences work or on which the materials are delivered. When a claimant has not been paid or anticipates not being paid, it must send the surety a notice of claim within the time specified in the contract, which is generally 120 days from the date on which the services were completed or the materials were delivered. THE DECISION IN PANFAB On June 26, 2018, the Court of Appeal again examined the principle that requires disclosure to the surety in order to obtain payment for labour and materials, in Industries Panfab inc. v. Axa Assurances inc., 2018 QCCA 1066. In 2010, the Local Housing Bureau (the “Bureau”) retained Groupe Geyser inc. (“Geyser”) to construct three buildings in Longueuil with a total of 180 units. As stipulated in the construction contract, Geyser obtained a surety bond from Axa Insurance (“Axa”) to guarantee payment for labour and materials. Geyser subcontracted with Les Revêtements RMDL (“RMDL”) for the exterior cladding of the three buildings it was constructing. RMDL then signed a $330,000 contract with Industries Panfab inc. (“Panfab”) for it to supply metal sheathing boards. A few days before making its first delivery, Panfab informed Geyser, Axa and the Bureau of its contract to supply RMDL. A few months after the first delivery, RMDL ordered additional sheathing boards that were not part of RMDL’s initial order from Panfab. Panfab made an additional disclosure to the surety and upped the total cost of its contract. Panfab made two additional disclosures, in each of which it stated the new, higher total cost of its contract. Panfab’s total invoice for all of the materials came to $446,328.24, but it received only $321,121.84. Its claim was therefore for $125,206.40. RMDL declared bankruptcy in 2012 and, given the situation, Panfab sought to claim under the surety bond for payment for its materials. Decision at trial At trial, the Court found that Axa’s surety bond contract contained a stipulation for the benefit of third parties, based on which Panfab could characterize itself as a creditor under the contract and thus benefit from the guarantee provided by the surety bond. However, the Court concluded that there was only one contract between the parties and that the increase in the value of the contract had been disclosed more than 60 days after the first delivery of materials. In fact, it characterized the amount claimed as an overpayment and limited the amount that it ordered Geyser and Axa to pay to $54,830.66, since the effect of a judgment for the overpayment would have been to alter the terms of the surety bond contract and add to the respondents’ contractual obligations.2 Appeal In this specific case, the Court of Appeal found that the obligation of Geyser and Axa to jointly and severally pay the amount claimed for the materials to be used in the construction arose at the point when Panfab characterized itself as a creditor by making its first disclosure. The Court of Appeal held that the surety bond contract did not require that the value of the contract for the supply of materials be disclosed. The mandatory information to be provided was the type of work, the nature of the contract, and the name of the subcontractor. Panfab disclosed its contract with RMDL, the subcontractor, within the 60 days allowed and thus complied with the time requirements. The obligation to pay Panfab arose at that point. Given that the surety bond contract did not require that the value of the contract be stated in the notice of disclosure, the Court was of the opinion that Panfab had demonstrated good faith and transparency in informing Geyser and Axa of the changes to the value of its contract with RMDL, by providing amended notices of disclosure. The claim could therefore not be limited on the ground that Panfab had stated the value of its contract in its notice of disclosure, when there was nothing that required it to do so. The Court of Appeal therefore reiterated the principle that there is only one contract and thus only one notice of disclosure, notwithstanding the fact that Panfab sent the surety amended notices.3 An order for reimbursement for the full amount to be paid does not alter the terms of the surety bond contract. The Court therefore concluded that the trial judge had erred by holding that the amended notices of disclosure sent by Panfab were time-barred and were necessary in order for the total claim to be allowed. The Court of Appeal took the opportunity to reiterate the scope of the duty to inform on the part of a materials supplier or subcontractor. Geyser submitted that Panfab had breached its duty to inform and that its breach was the reason for the shortfall in the amounts withheld for paying all of the subcontractors and suppliers. The Court did not accept that argument; it relied on Banque canadienne nationale v. Soucisse (1981),4 which set out the foundation for a creditor’s duty to inform, and on article 2345 C.C.Q., reiterating that a creditor is required to provide any useful information to the surety at the request of the surety. In this case, Geyser and Axa had never asked Panfab for additional information under that article. To summarize, Panfab clarifies the already settled law regarding notices of disclosure to sureties, as stated in Fireman’s Fund (1989)5 and Tapis Ouellet inc. (1991), in particular: when a contract for the supply of materials is shown to exist between the parties and the materials have been incorporated into a construction project, the subcontractor may claim the amounts owed under the surety bond contract after sending a notice of disclosure that meets the requirements set out in that contract. It must be kept in mind that any surety bond contract may contain specific clauses and that reference must be made to those clauses. That is why the Court in Panfab concluded that the information relating to the value of the contract was not mandatory in the notice to the surety, since, in that case, the surety bond contract did not require that the value of the contract be included in the notice of disclosure. Vigilance is therefore the order of the day when it comes to the terms of surety bond contracts.   MONDOUX, Hélène, François BEAUCHAMP, “Les cautionnements de contrats de construction” in Collection de droits 2017-2018, École du Barreau du Québec, vol. 7, Contrats, sûretés, publicité des droits et droit international privé, Cowansville, Éditions Yvon Blais, 2017, p. 59. Industries Panfab inc. v. Axa Assurances inc., 2018 QCCA 1066, para. 14. Ibid. para. 22. National Bank of Canada v. Soucisse, [1981] 2 S.C.R. 339. Fireman’s Fund du Canada, cie d’assurances v. Frenette et frères Itée, 1989 CanLII 815 (QC CA).

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  3. The City of Montreal revises its by-law on contract management

    Redefining and expanding the concept of conflict of interest, clarifying situations of “ineligibility to contract”, introducing a principle of supplier rotation, increasing the eligibility threshold for the award of a private contract. These are the main changes that the City of Montreal has made to what is from now on its by-law on contract management. Section 573.3.1.2 of the Cities and Towns Act, CQLR c. C-19, which requires all municipalities to adopt a contract management policy, entered into force on March 1, 2010.  There have been several versions of the City of Montreal’s policy, which was first adopted on December 16, 2010, including the most recent version adopted on August 25, 2016.1 On January 1, 2018, the Act mainly to recognize that municipalities are local governments and to increase their autonomy and powers, SQ 2017 c.13 (or “Bill 122”) transformed these contract management policies into by-laws.  The City of Montreal took this opportunity to revise its own policy, a new version of which was circulated to various City authorities beginning May 28, 2018 in order to be adopted on June 22 2018. The new by-law enters into force on June 26, 2018. Overview of the main changes Clarifications relating to scope: The policy’s central objective was to “sanction wrongful acts committed in the context of city contracts”,2 whatever these acts may be. The by-law is amended to clarify that it applies not only to contracts entered into by the City of Montreal, but also to subcontracts directly or indirectly connected to those contracts or to the related procedures (s. 3), a point on which the previous wording was ambiguous. The by-law also states that it is deemed to be an integral part of these contracts (s. 3, in fine). Codification of certain practices: As per s. 12, the City of Montreal is now obliged to preserve the personal notes and individual assessment prepared by each member of the selection committee, the composition, deliberations and recommendations of which remain confidential. As per s. 31, the City of Montreal must maintain a register of ineligible persons; this register is separate and distinct from the Register of enterprises ineligible for public contracts held by the secretariat of the Treasury Board in accordance with the Act respecting contracting by public bodies, CQLR c. C-65.01. Changes regarding ineligibility Obligation of all subcontractors to declare not only that they have no conflict of interest, but also that they are not in a situation that confers them an unfair advantage (s. 5), meaning a situation in which they would have had access to information related to a call for tenders which was not publicly available, for any reason whatsoever (s. 1(12)). For example, a subcontractor could be disqualified or have its contract terminated and be declared ineligible if the City of Montreal discovered that one of its former employees was associated in any way with the preparation of a call for tenders for the contract at issue. This new section also recognizes an arbitration award that stated that the twelve-month prohibition on hiring an individual who participated in the preparation of a call for tenders was too broadly worded and amounted to an “an unreasonable hindrance to the employability of scientists;”3 the proposed rewording (ss. 5-7) seeks to limit this prohibition to what is strictly necessary, i.e. situations where this participation confers an unfair advantage or creates a conflict of interest. Prohibition of persons listed in the City of Montreal’s register of ineligible persons from working on or from having an interest in a City of Montreal contract, without a specific authorization from the City (ss. 15-16, 28-30). For example, an architect listed in the register of ineligible persons could not be included on a team of professionals contracted by the City of Montreal, and could not finance this team. Clarification as to the cumulative nature of ineligibility periods for repeat offenders (s. 32) Offenders who, during their first two years of ineligibility, commit another offence which would be punishable by five years of ineligibility, become ineligible for six years from the date of the second offence.  Relaxation and tightening of certain rules related to awarding contracts and contract management Increase of the eligibility threshold: the City of Montreal can enter into a private contract if it involves an expenditure that is less than the expenditure threshold for a contract that can be awarded only after a call for public tenders in accordance with section 573 of the Cities and Towns Act, CQLR c. C-19 (s. 33). Fixed by ministerial decree, this threshold is currently set at $101,100. Rotation principle: regarding these private contracts, the City of Montreal may not enter into two similar contracts with the same supplier within 90 days of each other (s. 34). Introduction of rules specific to managing variations in the planned quantity of items for unit price contracts (ss. 1(14), 18) and the use of contingencies in budgeting; these contingencies are from now on specifically defined as “any modification of a contract that is accessory to that contract and that does not change its nature” (ss. 1(4), 19-20, translation). Several of the proposed changes recognize the recommendations resulting from arbitration awards or created by the Office of the Inspector General of Montreal.4 All of these changes are part of the City of Montreal's desire to reinforce the principles of healthy competition, transparency, and fairness that govern public markets in Quebec.   City of Montreal, Politique de gestion contractuelle (version finale), telle qu’adoptée par le conseil municipal, à sa séance du 23 août 2016, et par le conseil d’agglomération, à son assemblée du 25 août 2016, [“Contract management policy (final version), as adopted by the City Council in its session on August 23, 2016, and by the agglomeration council at its meeting of August 25, 2016”], online. See the Decision summary for case no. 1184990002 for decision-making documents sent to elected officials in anticipation of the agglomeration council’s regular meeting on May 31, 2018, online, p. 13/35. Le syndicat professionnel des scientifiques à pratique exclusive de Montréal c. Montréal (Ville), 2016 CanLII 68692 (Mr. André Sylvestre) [translation]. See the Decision summary for case no. 1184990002 for decision-making documents sent to elected officials in anticipation of the agglomeration council’s regular meeting on May 31, 2018, online.

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  4. Builders’ Risk Insurance: Interpreting the Usual Faulty Workmanship and “LEG” Exclusions in connection with Ledcor and Acciona

    Ledcor The issue in Ledcor1 was whether the builder’s risk policy taken out by the contractor that was contractually responsible for cleaning the windows of a building, covered damage to the windows caused by its poor cleaning work. The financial impact was significant since the cost of re-doing the cleaning was $45,000, while the cost of replacing the damaged windows amounted to $2.5 million. The Supreme Court decided that only the cost of re-doing the cleaning was excluded and so replacement of the windows, which was damage resulting from the faulty workmanship, was covered. The decision of the Supreme Court of Canada in Ledcor has clarified the interpretation of the faulty workmanship exclusion in builder’s risk insurance cases by limiting it to defective work and connecting the scope of the exclusion to the contractual obligations of the contractor responsible for the faulty workmanship (our Lavery bulletin on this issue can be accessed by clicking here). We would start by pointing out that the wording of the faulty workmanship exclusion in Ledcor2 is similar to the usual wording for this type of exclusion in builder’s risk policies. The decision in Ledcor is a landmark ruling. The approach it suggests, of examining the obligations set out in the contract in order to draw the line between faulty workmanship and damage caused by the faulty workmanship, is easy to apply in cases where the contract has only one component, as was the case in Ledcor. However, in cases where a faulty contractor’s contract has multiple severable components and the defective work relates to only one of them, applying the contract-based approach presents problems. In that situation, considering strictly the contract-based approach, the costs associated with the components that were properly performed would be excluded. However, that result would run counter to the objective of builder’s risk insurance policies, which are intended to provide broad coverage in order to avoid construction projects being paralyzed by disputes. LEG Exclusions LEG exclusions could well offer a solution in the case of contracts consisting of multiple severable components. These exclusions are worded in precise terms and have a clearly defined scope. LEG exclusions are clauses developed in the 1990s by the London Engineering Group (“LEG”). They are found in some builder’s risk insurance policies, and are widely used in Europe. They are less common in Canada, particularly on major projects, and are rarely used in the United States. LEG exclusion clauses can be briefly described as follows: Exclusion LEG 1/96 - “Outright Defects Exclusion”: excludes all loss or damage due to defects of workmanship, materials or design. Exclusion LEG 2/96 - “Consequences Defects Exclusion”: excludes only costs inherent in the proper performance of the work and rendered necessary to rectify a fault or defect discovered immediately prior to the damage occurring. Exclusion LEG 3/96 (revised in 06) - “Improvement Defects Exclusion”: excludes only costs incurred to improve the original design, material or performance of the work beyond the damage that occurred. These three exclusion clauses thus represent three graduated levels of coverage, with a premium that corresponds to the level of coverage that the parties wish to take out. Acciona and the recommendations of the IBC The decision of the British Columbia Court of Appeal in Acciona3 interpreted exclusion LEG 2/96 in a builder’s risk insurance policy for the first time in Canada. Also called “Consequences Defects Exclusion”, that is the exclusion that deals with damage resulting from faulty workmanship. IBC endorsement 4047, which has been recommended since 2010 to improve IBC 4042 in connection with builder’s risk insurance, essentially adopts the wording of exclusion LEG 2/96. The change between form 4042 (the wording of which was similar to the exclusion in Ledcor) and endorsement 4047 (the wording of which is similar to exclusion LEG 2/96 in Acciona) lies in the addition of a definition of the expression “resulting damage”. Like the text of exclusion LEG 2/96, that definition refers specifically to costs incurred to rectify the fault or defect if it had been discovered immediately before the damage occurred and if the damage had been rectified at that time. Exclusion LEG 2/96 underlies severability. This exclusion proposes a method by which the faulty workmanship, which is excluded, on the one hand, and the damage, which is covered, on the other hand, can be delineated. Only those costs that are inherent in the proper performance of the work to rectify the faults or the defect before the damage occurs will be covered by the exclusion. The decision in Acciona4 in connection with the application of exclusion LEG 2/96 proposes that the defect and the resulting damages be delineated as follows: "… the excluded costs are only those costs that would have remedied or rectified the defect immediately before any consequential or resulting damage occurred, but the exclusion does not extend to exclude the cost of rectifying or replacing the damaged property itself; the excluded costs crystallize immediately prior to the damage occurring and are thus limited to those costs that would have prevented the damage from happening." This approach implies that the exclusion crystallizes immediately before the damage but does not include the damage, which will, on the other hand, be covered5. To the extent that the builder’s risk insurance market wants to adopt it, endorsement 4047 suggested by the IBC, like the text of exclusion LEG 2/96, makes it possible to delineate the faulty workmanship and consequential damage, precisely, at a point in time. The Ledcor and Acciona approaches will help to reduce builder’s risk insurance litigation The decisions of the Supreme Court in Ledcor and of the British Columbia Court of Appeal in Acciona are key decisions in respect of questions of coverage that arise under builder’s risk policies. The wording of the exclusions they analyzed differs significantly and the two approaches they suggest are different. However, these two decisions provide a clear and specific methodology for delineating the scope of the exclusions. The approach based on the obligations set out in the contract suggested by the Supreme Court in Ledcor, like the approach based on severability suggested in Acciona, will make it possible to easily resolve some problems in applying faulty workmanship exclusion clauses in builder’s risk policies. These approaches will also reduce the volume of litigation. If you have questions or would like to know whether the methods proposed in Ledcor and Accionaapply to your case, our specialists in construction insurance will be able to help you.   Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Company et al. [2016]¸2 SCR 23. This wording in Ledcor is similar to the wording suggested by the IBC in drafting a similar exclusion in form 4042 (builder’s risk insurance) 1998. Acciona Infrastructure Canada Inc. v. Allianz Global Risks US Insurance Company, 2015 BCCA 347. This decision of the British Columbia Court of Appeal is final; the case had been referred back by the SCC after the decision in Ledcorand was withdrawn before the hearing scheduled for June 2017. Supra, note 5. On this point, see Sharon C. Vogel, Journal of the Canadian College of Construction Lawyers 2016, The Evolution of Builder’s Risk Insurance in Canada: A Brave New World for Resulting Damages?

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  1. Marie Cossette to speak at the APCHQ Annual Conference

    On October 21, Marie Cossette, a partner and head of the Business Integrity and Public and Administrative Law groups for the Québec City office, will speak at the 56th Annual Conference of the Association des professionnels de la construction et de l’habitation du Québec (APCHQ), being held at the Hilton Lac-Leamy in Gatineau. In her presentation entitled La résiliation unilatérale d’un contrat de construction par le client : les enjeux pour chaque partie, she will address different issues such as determining the fair compensation owed to the contractor while protecting the work provider’s right to terminate the contract, the aspects to include in the contractor’s claim and the obligations of the parties when negotiating any such claim. Click here for more information or to register. 

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  2. Over one hundred participants attend Lavery construction law conferences

    Lavery held two conferences, at its Montréal and Québec City offices respectively on June 1 and 8, 2017, on the latest developments, trends, and issues in construction law. Over one hundred participants attended the conferences. Marie-Claude Cantin moderated the Montréal conference, during which construction arbitration (Emil Vidrascu), the principle of fair treatment of bidders (Julie Grondin), and certain types of construction project financing (Étienne Brassard) were discussed. Marie Cossette moderated the Québec City conference, during which the legal distinction between the principal contract and sub-contract (François Bélanger), the decision in Buesco c. Hôpital Maisonneuve-Rosement (Simon Rainville), and the essential due diligence principles with respect to licences, regulations, and authorization certificates (Pier-Olivier Fradette) were addressed.

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  3. Pierre Marc Johnson speaks at the 8th edition of the Québec Industrial Barometer

    On May 12, Pierre Marc Johnson, counsel and lead negotiator for the Quebec government on the Comprehensive and Economic Trade Agreement (CETA), commented on the results of the 8th edition of the Québec Industrial Barometer during an event organized by Sous-Traitance Industrielle Québec (STIQ). At the same time, he informed the manufacturers present that it was important to put in place a European Union export strategy and action plan given the CETA’s imminent provisional entry into force. Since 2009 STIQ has been publishing the Québec Industrial Barometer, which draws an annual portrait of the manufacturing sector using a series of measurable indicators and provides an overview of the situation in Quebec.

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