COURT FILE NO.: FS 5767/11

DATE: 2012/03/20

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jayne elizabeth murphy

A N D:

john patrick murphy

BEFORE: Turnbull, J.

COUNSEL: Robert MacLeod, Counsel for the Plaintiff

Keith Simpson, Counsel for the Defendant

HEARD: March 9, 2012

E N D O R S E M E N T

1. The respondent, Mr. Murphy, has brought a motion (found at Tab 7 of the Continuing Record) for an order for guideline child support for two and one half children. Two of the children live with him and one child spends approximately fifty per cent of his time with each of his parents. He also seeks an order that the applicant pay to him interim disbursements and costs in the sum of $6,500.00 without prejudice to his right to bring a further motion for interim disbursements and costs.

2. The applicant strongly resists both motions.

3. The one matter on which the parties did agree was that the application for divorce in action number 105/09 shall be dismissed. It is so ordered. Background

4. The respondent, Mr. Murphy, is 52 years of age and the applicant, Ms. Murphy, is 48 years of age. They began cohabiting in November of 1986 and were married on November 14, 1987. They separated on February 2, 2009. They have four children, namely: 1) Patrick Benjamin Murphy, 18 years of age, date of birth May 25, 1993, who resides with his mother; 2) Matthew James Murphy, 17 years of age, date of birth September 14, 1994, who resides with his father; 3) Luke Shawn Murphy, 15 years of age, date of birth August 22, 1996, who resides with his father; 4) Daniel Phillip Murphy, 11 years of age, date of birth February 18, 2000, who lives 50 percent of the time with each parent.

5. The applicant is a self-employed dental hygienist with twenty years of experience. In 2010, she had gross earnings of $63,557.75 and declared net employment earnings of $54,937.04, after deducting various business expenses. However, certain capital cost expenses were included in those business expenses and Mr. MacLeod conceded for the purposes of this motion that the Line 150 income for consideration of child support would be approximately $58,000.00.

6. In addition, the applicant has a business which she operates from her home making mouth guards for athletes. She has declared for tax purposes approximately $100.00 per month income which totals to $12,000.00 per year.

7. For the purposes of this interim motion, I find that the applicant’s income for child support purposes is and has been $58,000.00 in 2010 and 2011.

8. Mr. Justice Parayeski made a final order, dated March 26, 2010. Pursuant to paragraph 3 of that order, child support was ordered to commence April 15, 2010, and was to be paid pursuant to the Child Support Guidelines based on a shared custody regime. It was ordered that the applicant was to pay to Mr. Murphy an advance of child support in the amount of $10,000.00. In paragraph 4, the court ordered that the proper amount owing for 2010 was to be calculated no earlier than December 2010.

9. In 2010, at the time of the order of Parayeski J., counsel advised that both Luke and Daniel were living fifty percent of the time with each parent. Since August 2010, Luke has principally resided with his father, while Daniel has continued spending half his time residing with his mother and half his time with his father.

10. Mr. Murphy lost his job in November 2009. There does not seem to be any issue that his income for the year 2010 was based on employment insurance earnings of $20, 200.00 and I so find. On or about February 11, 2011, Mr. Murphy obtained a sales job at Fastenal in Simcoe. He is paid a salary of $625.00 per week gross and earns commission on top of that. He has advised the court and I accept for the purposes of this motion that his 2011 T4 income from Fastenal and Wal-Mart is $33,230.00. However, the respondent asserts that his ice cream business lost approximately $7,100.00 during 2011.

11. Mr. Murphy operates a seasonal ice cream business in Waterford, Ontario as a personal proprietorship. He purchased it in March of 2010. He swore in his affidavit that in 2010, the business had a net loss position of $29,225.00. He has continued operating this seasonal summer business. At paragraph 9 of his affidavit dated December 15, 2011, he swore that in 2010 the gross income of the business was $73,559.47 with a gross profit of $30,596.32. However, he reported an operating loss of $29,225.00. In 2011, he stated that while revenues were down marginally to $71,239.45, his gross profit increased to $45,665.27 leaving him with a net loss of just $7,122.00.

12. The applicant argued that the ice cream business “cash business”. She has sworn that there is no debit card or credit card means of payment when ice cream is purchased at the business, which has been in existence for 52 years. She argued that Mr. Murphy paid $125,000.00 for the business because it is a income earning business.

13. In the affidavit of Lisa Lewis, sworn January 12, 2012, (found at tab 13), Rebecca Coates, the former owner, has provided her statement of business or professional activities for the years 2007, 2008 and 2009. In 2007, the sales were reported as $83,361.04. She showed a loss of $1,410.00 for the business in that year. In her 2008 statement of business activities, Rebecca Coates filed her income tax return showing gross sales of $84,233.23. Her statement only showed a net income from the business of $4,179.07. In 2009, Ms. Coates also filed a statement of business activities related to the ice cream business. It showed sales of $90,178.41. It showed a net loss in the business of $12,262.16.

14. Terry Kozicki filed an affidavit sworn January 5, 2012. He has sworn that when he purchased the business and operated it from 2000 to 2006, he was assured the annual revenues were around $90,000.00 annually. He became the sole owner in 2003 and was the sole operator of the business in 2004 and 2005 during which years he generated revenues of $108,000 and $105,000 respectively. He ultimately sold it to Rebecca Coates and her partner.

15. The father of Rebecca Coates is Steven Edward Carroll. He swore an affidavit found at Tab 11. He swore that he financed the purchase of the business when Rebecca and her husband Tim owned the business from 2007 through 2009. He has sworn that based on his belief and personal knowledge that the business could expect gross annual revenues of $120,000, he decided to finance Patrick Murphy’s purchase of the business by providing him a $100,000.00 mortgage. He has noted that Mr. Murphy has made every mortgage payment in accordance with the term of the mortgage. Mr. Carroll also swore that at the present time he is dating Jane Murphy but noted that their relationship did not start until many months after he had provided the financing for Mr. Murphy’s purchase of the business.

16. During his able submissions, Mr. MacLeod urged me to find that the evidence before the court would justify imputing a significant portion of “cash receipts” in this business which should be imputed to the annual income of Mr. Murphy.

17. Steven Carroll has not sworn that cash was regularly taken out of the business by his daughter Rebecca. Rebecca Coates has not filed an affidavit or sworn that cash was regularly taken out of the business by them. Mr. Murphy has not sworn that he has taken cash out of the business. On an interim motion such as this unless the figures are so egregious as to defy credibility, I don’t think it is appropriate to infer that cash has been taken out of the business. As counsel noted on the motion before me, questioning has not taken place which will obviously include a detailed analysis of the bookkeeping related to the ice cream business.

18. Mr. Murphy has sworn that his business lost approximately $7,100.00 in 2011 so that his Line 150 income for child support considerations will be approximately $26,000.00. His counsel has noted that because the business is still losing income, Mr. Murphy is unable to refinance the business and the mortgage is coming due to Mr. Carroll who is not prepared to renew it. Hence, apparently Mr. Murphy is attempting to get out of the ice cream business as soon as possible.

19. In the circumstances, I impute no income or losses to the respondent during the time of his ownership of the business. On the materials before me, I have no verification that he has earned profits from the business in the form of cash or that he has lost income to the extent he has asserted. I, therefore, find that for the period March 2010 to January 2011 Mr. Murphy should be imputed with income of $20,500.00 per year for child support purposes. From February 2011 to the present time, he should have income imputed to him of $33,000.00 per year. Clearly, the imputation of these amounts to Mr. Murphy is on a without prejudice basis for either party to be able to prove otherwise at the trial of this matter. Analysis

20. Counsel have provided me with a number of cases dealing with “hybrid” custody arrangements. As those cases have pointed out, the Child Support Guidelines do not contemplate such a custody arrangement and therefore the courts in a number of cases have had to attempt to interpret and apply the appropriate principles.

21. In considering this matter, I subscribe to the approach recommended by Zisman, J. of the Ontario Court of Justice in the case of Sadkowski v. Harrison-Sadkowski 2008 ONCJ 115, [2008] OJ No 1013. The learned judge canvassed a number of cases which took differing approaches to the method of calculating child support in a hybrid situation. In that regard she carefully reviewed Wouters v. Wouters, 2001 SKQB 142, which recommended a two-step process to be followed by the court when there is a hybrid of custody arrangements. It recommended that the starting point should be to simply calculate the child support payable with respect to those children whose custody is not shared. Once that exercise was completed, the court was directed to apply Section 9 of the Child Support Guidelines with respect to the support of the remaining children whose custody is shared. In that second step, the court held there was a broad discretion with respect to the amount payable.

22. In the case of Burns v. Burns (1998) 1998 14880 (ON SC), 40 R.F.L. (4th) 32 (Ont. Fam. Ct.), a different approach was recommended. That is better known as “economies of scale” approach. In Burns v. Burns, two of the children resided with the mother on a full time basis while the third child spent 50 percent of her time with each parent. The court calculated child support on the basis that the mother had 2.5 children in her care and the father was responsible for 0.5 of a child. The court held that the mother’s obligation for 0.5 should then be set off against the father’s obligation of 2.5 children. The logic behind that approach was that the Child Support Guidelines recognize the principle of economies of scale and the fact that there are additional costs to maintaining a residence for children in a shared custody or hybrid situation. Zisman, J. wrote in paragraph 25 of her judgment: “Accordingly it appears to me that dealing with ‘hybrid’ custody situations under an ‘economies of scale’ approach and applying a section 9 analysis, in accordance with the principles in Contino v. Leonelli-Contino, gives the court the most discretion to arrive at a fair and proper quantum of child support. It is my view that this approach is most consistent with the principles of the guidelines.”

23. Counsel on the motion before me agreed with that approach as the appropriate method to calculate child support in the case at bar. I concur and I am reinforced in that view by virtue of the decision of Hofsteede v. Hofsteede, 2006 2052 (ON SC), [2006] OJ No. 304 (Ont. SCJ) in which Marshman, J. of this court followed the same line of reasoning.

24. In the mathematical breakdown produced below in this ruling, I have attempted to apply the principles enunciated in the case based upon the incomes attributed to the parties as outlined in this ruling. I have also taken into consideration the additional factors under Section 9 of the Child Support Guidelines including the increased costs of shared custody arrangements and the conditions, means, needs and other circumstances of each parent or spouse and of the children for whom support is sought. In particular, I have taken into account the fact that both Mr. and Ms. Murphy assert that they have incurred extensive expenses on their own account in caring for the children when they are in their residence. Clearly, the consideration of Section 7 expenses, while not before me in formal way on this motion, will be considered by the trial judge when this matter is tried.

25. I have taken into consideration the fact that Mr. Murphy has sworn that he is having trouble making ends meet and that the heat and hydro in his residence may be cut off due to his constrained financial situation. I have reviewed the financial statements of the parties and taken into account that Ms. Murphy is residing with Mr. Carroll and therefore her residential expenses necessarily will be somewhat reduced. Mrs. Murphy swore that the children spent most of the 2011 summer living with her but that was disputed by Mr. Murphy. I find for the purposes of this interim ruling, absent viva voce evidence, that the boys lived with their parents in the same hybrid parenting arrangement through the entire 2011 year as reflected in the calculations in paragraph 26 below.

26. Therefore calculate the child support payable from March 2010 to the present date as follows: Period of Shared Custody: March 2010 to August 2010 (6 months) Ms. Murphy earned $58,000.00. Child support for four children is $1,360.00 per month. Mr. Murphy earned $20,500.00. Child support for four children is $577.00 per month. Set off amount is $863.00 per month which for six months is $5,178.00. Period of “Hybrid” Custody: September 2010 to January 2011 (5 months) Ms. Murphy earned $58,000.00. Child support for three children is $1,158.00 per month. Mr. Murphy earned $20,500.00. Child support for two children is $315.00 per month. Set off amount is $843.00 per month which for five months is $4,215.00. Period of February 2011 to December 2011 (11 months) Ms. Murphy earned $58,000.00. Child support for three children is $1,139.00 per month. Mr. Murphy earned $33,000.00. Child support for two children is $488.00 per month. Set off amount is $651.00 per month which for 11 months is $7,161.00. Interim Child Support Payable by the applicant: $16,554.00. Amount Paid to date: $10,000.00 Net Interim Child Support payable by the applicant to and including December 31, 2011, is $6,554.00.

27. I have reviewed the wording of the order of Parayeski J. and find that the payment of $10.000.00 pursuant to paragraphs 3 and 4 of that order was simply an agreed estimate of the child support payable to the end of December 2010 and was intended to be simply a credit for child support payable when the respective financial situations of the parties was better known.

28. It is ordered that the applicant shall pay child support to the respondent in the sum of $651.00 per month commencing the first day of January 2012 and on the first day of each month thereafter until further order of the court.

Advance for Interim Disbursements

29. Mr. Murphy seeks an order for an advance of $6,500.00 to cover his legal fees and disbursements which he has incurred to this point. He has explained in his affidavit that his financial resources are very limited and that he is unable to continue to found the costs of counsel for this litigation unless the applicant is ordered to advance pay some of his legal costs. Counsel relied on Rule 24 (3) and the cases of Agresti v. Hatcher [2004] O. J. No. 910 (SCJ) and Jordan v. Stewart [2002] O. J. No. 4074 (SCJ) in support of that request.

30. I find both those cases distinguishable from those at bar. Based on the award of retroactive child support made in this ruling, I do not find on the facts before this court that such an order is warranted.

Conclusion

31. It is ordered that the applicant pay retroactive child support to the respondent to an including the 31st day of December, 2011 fixed in the sum of $6,554.00.

32. It is ordered that the applicant shall pay child support to the respondent for 2.5 children in the sum of $651.00 per month commencing the first day of January, 2012 and on the first day of each month thereafter until further order of the court.

33. It is ordered that the respondent’s motion for an order requiring the applicant to pay him the sum of $6,500.00 as an advance payment to assist in paying legal fees and disbursements, is dismissed.

Costs:

34. If counsel cannot agree on the costs of this motion, they may provide me with brief written submissions with a Costs Outline on or before March 30, 2012.

Date: March 20, 2012

Turnbull, J.