A High Court judge has ruled that Cornwall Council can terminate a £160m ten-year outsourcing contract signed with BT in March 2013.
The deal required BT Cornwall to provide IT, payroll, telehealth and telecare, and document management services.
The council argued that the company engaged in material breach of the contract because of its failure to carry out services to the required contractual standards.
Earlier this year, BT filed an injunction to prevent the council from terminating the contract.
Cornwall Council said: "We welcome the decision of the High Court to find in favour of the council and reject the claim by BT Cornwall that the authority was not able to terminate the contract."
The council plans to give termination notice to BT before Christmas. About 250 staff will now be transferred back to Cornwall Council from BTC from January 2016.
A BT spokesperson said: "We are reviewing the judgement carefully and considering its implications.
"We will be meeting with the council at the earliest opportunity to discuss the full impact of the Court’s decision on BT Cornwall."
