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Infrastructure (Ont) - Government Consultants. ITCAD Tech Inc. v. Patel et. al.
In ITCAD Tech Inc. v. Patel et. al. (Ont Div Ct, 2026) the Ontario Divisional Court dismissed an appeal, here involving a cross-claimed case where the motion court granted to plaintiffs [Patel] "summary judgment ... on their claim for the two months pay that had been withheld and awarded them punitive damages" and also found that the plaintiffs "had breached the non-competition clause in the contract between the parties and awarded" damages to the the defendants [ITCAD] (plaintiffs by counterclaim).
The court illustrates unique contractual 'Vendors of Record' arrangements for Ontario government consultants [see this government link: Vendors of Record], here in the course of a cross-claimed litigation dispute:[1] Kishan Patel is an information technology consultant. He carries on business through his personal corporation, TechSpirer Inc. In this decision they will be collectively referred to as the “Consultants”. ITCAD Tech Inc. (“ITCAD”) is a vendor of record for the Ontario government. This means that it may supply consultants to the government, which does not hire consultants directly. Vendors of record bill the government for the consultants’ services and retain a portion of the fees received as compensation for their services.
[2] ITCAD assisted the Consultants to obtain a position with a branch of the Ministry of Health (“MOH”). The Consultants entered into a contract with ITCAD that contained a non-competition clause that prohibited the Consultants from performing work for that branch of the Ministry of Health for 12 months following the termination of its contract with ITCAD. During the term of the contract, ITCAD lost its position as a vendor of record with the government. ITCAD negotiated arrangements with other vendors of record who were prepared to take on the Consultants and pay ITCAD a portion of the fees the government paid them for the Consultants’ services.
[3] ITCAD directed the Consultants to enter into new arrangements with one of these vendors of record. In order to pressure the Consultants to do so, ITCAD withheld approximately two months of fees that it had received from the government for the Consultants’ services. The Consultants chose to go with another vendor of record who was prepared to pay the Consultants a greater portion of their fees than the vendor of record chosen by ITCAD.
[4] The Consultants commenced an action against ITCAD for the two months pay that ITCAD had withheld. They also sought punitive damages against ITCAD for withholding their pay.
[5] ITCAD counterclaimed for damages against the Consultants, claiming that their actions in using a vendor of record that it had not suggested violated the non-competition clause between the parties.
[6] Both parties brought summary judgment motions on their claims. On June 2, 2025, Dow J. granted summary judgment to the Consultants on their claim for the two months pay that had been withheld and awarded them punitive damages. He also found that the Consultants had breached the non-competition clause in the contract between the parties and awarded ITCAD damages in relation to that breach.
[7] ITCAD has appealed the motion judge’s award of punitive damages and has appealed the quantum of damages awarded to it on its counterclaim, claiming that the amount awarded should have included an amount for HST. The Consultants have cross-appealed, arguing that the motion judge erred in awarding ITCAD any damages for violating the non-compete clause, since that clause was unenforceable under the provisions of the Employment Standards Act, R.S.O. 2000, c. 41 and at common law. They also maintained that the motion judge erred when he failed to find that the contract between the parties was frustrated when ITCAD lost its position as a vendor of record with the government. Finally, it argued that the motion judge erred in his assessment of the quantum of punitive damages.
[8] For the reasons that follow, I would dismiss the appeal and cross-appeal as to punitive damages and allow the cross-appeal with respect to the breach of the restrictive covenant. The motion judge erred in finding that the restrictive covenant was enforceable at common law in the circumstances of this case.
Factual Background
[9] In 2021 Mr. Patel became interested in obtaining a position with the MOH and learned that the only way to be hired was through a vendor of record. He therefore contacted ITCAD, which is a vendor of record. Through ITCAD he went on a job interview with a branch of the MOH and did not succeed in getting a position. Another position became available and, after receiving some coaching from Linda Zhao, the operator of ITCAD, he was successful in being offered the position through ITCAD.
[10] After being offered the position, Mr. Patel incorporated TechSpirer Inc. On May 21, 2021, TechSpirer entered into an Independent Contractor Agreement with ITCAD that contained a 12-month non-competition clause. The contract expired on October 31, 2022.
[11] On November 24, 2022, Mr. Patel entered into a second contract with ITCAD. Its terms were essentially the same as the first contract, and extended to March 31, 2023.
[12] Under the arrangement, ITCAD billed the MOH for TechSpirer’s services and TechSpirer billed ITCAD for its services. The amount billed by ITCAD to the MOH was more than the amount billed by TechSpirer to ITCAD.
[13] In February of 2023, ITCAD and Ms. Zhao were added as defendants to a fraud action. As a result, ITCAD’s status as a vendor of record was suspended, leaving the Consultants in a precarious position. That status was restored in August of 2024, when the action against it was discontinued.
[14] After its suspension, ITCAD identified and enlisted other entities who were prepared to act as vendors of record for ITCAD’s consultants and to pay ITCAD a share of the monies they received for those consultants’ services. ITCAD told the Consultants that if they entered into an agreement with one of the identified vendors of record, ITCAD would waive the provisions of the non-compete clause.
[15] Instead of entering into an agreement with one of the vendors of record identified by ITCAD, TechSpirer, on March 30, 2023, entered into a one-year agreement with another vendor of record that agreed to pay TechSpirer a greater share of the money paid by MOH for its services than ITCAD did.
[16] TechSpirer billed ITCAD $31,238.01 for its services in February and March of 2023. ITCAD refused to pay the amount and threatened legal action for the Consultants’ refusal to work with one of their sponsored vendors of record.
[17] The amount remained unpaid, prompting the Consultants to bring an action against ITCAD in which it also claimed punitive damages. ITCAD counterclaimed, seeking damages for what it alleged was the Consultants’ breach of the non-compete agreement, which it calculated to be $64,621.88. ITCAD admitted it owed the Consultants $31,238.01 and thus was seeking recovery of $32,383.87, being the difference between its alleged damages for the breach of the non-compete and the amount it owed the Consultants. The balance of the case [paras 18-54] may be interesting for anyone involved with Ontario government consultant contracting.
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