“The first issue is whether the Applicant should be entitled to costs on a full recovery basis because the Respondent engaged in bad faith conduct.
The test for whether a person’s conduct amounts to bad faith is a very high one. There is a detailed discussion of the test for bad faith in Jackson v. Mayerle, 2016 ONSC 1556, (2016) 130 O.R. (3d) 683. In that decision, the Court noted (at paras 56-60):
[56] But rule 24(8) requires a fairly high threshold of egregious behaviour, and, as such, a finding of bad faith is rarely made (S. (C.) v. S. (M.), [2007] O.J. No. 2164, 2007 CanLII 20279 (S.C.J.); Piskor v. Piskor [2004] O.J. No. 796, 2004 CanLII 5023 (S.C.J.); Cozzi v. Smith, [2015] O.J. No. 2926, 2015 ONSC 3626 (S.C.J.).
[57] In S. (C.) v. S. (M.), supra, Perkins J. defined bad faith as follows [at para. 17]:
In order to come within the meaning of bad faith in subrule 24(8), behaviour must be shown to be carried out with intent to inflict financial or emotional harm on the other party or other persons affected by the behaviour, to conceal information relevant to the issues or to deceive the other party or the court. A misguided but genuine intent to achieve the ostensible goal of the activity, without proof of intent to inflict harm, to conceal relevant information or to deceive, saves the activity from being found to be in bad faith. The requisite intent to harm, conceal or deceive does not have to be the person’s sole or primary intent, but rather only a significant part of the person’s intent. At some point, a party could be found to be acting in bad faith when their litigation conduct has run the costs up so high that they must be taken to know their behaviour is causing the other party major financial harm without justification.
[58] Bad faith is not synonymous with bad judgment or negligence. Rather, it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity. Bad faith involves intentional duplicity, obstruction or obfuscation: Children’s Aid Society of Peel Region v. F. (K.J.), [2009] O.J. No. 2348, 2009 ONCJ 252; Biddle v. Biddle, [2005] O.J. No. 1056, 2005 CanLII 7660 (S.C.J.); Leonardo v. Meloche, [2003] O.J. No. 1969, 2003 CanLII 74500 (S.C.J.); Hendry v. Martins, [2001] O.J. No. 1098, 2001 CarswellOnt 952 (S.C.J.).
[59] There is a difference between bad faith and unreasonable behaviour. The essence of bad faith is when a person suggests their actions are aimed for one purpose when they are aimed for [page699] another purpose. It is done knowingly and intentionally. The court can determine that there shall be full indemnity for only the piece of the litigation where bad faith was demonstrated (Stewart v. McKeown, [2012] O.J. No. 4851, 2012 ONCJ 644; M. (F.D.) v. W. (K.O.), [2015] O.J. No. 903, 2015 ONCJ 94).
[60] To establish bad faith, the court must find some element of malice or intent to harm (Harrison v. Harrison, [2015] O.J. No. 1533, 2015 ONSC 2002 (S.C.J.)).”