Canada: Education As Consumer Product? Ramdath v. George Brown College

Mr. Justice Belobaba's recent decision in the rare common issues trial of Ramdath v. The George Brown College, 2010 ONSC 2019 should make Ontario university and college administrators consider their words very carefully in course descriptions and other communications. His Honour's decision appears to expand the protections of the Consumer Protection Act, 2002, S.O. 2001, c.30, Sched. A (the Act) to allow actions by students in respect of claims made in college course descriptions. Moreover, the common issues decision was a rare example of the use of negligent misrepresentation in a class action, which will likely change the way both class counsel and defence counsel approach misrepresentation claims.

Facts

George Brown College of Applied Arts and Technology (GBC) located in the Toronto area, provides a wide variety of career-oriented programs for post-secondary students. GBC offered an "International Business Management Program," (the Program) starting in September 2007. GBC's course calendar described the Program as follows:

The designations/certifications listed in GBC's course calendar were issued by three separate, independent industry groups. GBC was not actually entitled to award any of the designations. Rather, each of these industry groups administered its own courses and its own exams, and in some cases required relevant work experience in addition to course work.

The students in the Program came from a wide cross-section of educational and work backgrounds, including students from around the world who paid $11,000 tuition for the 8-month Program, with the expectation that they would be entitled, at minimum, to take the qualifying examinations for the certifications at the end of the Program. However, through the course of the Program, students learned that they were not in fact entitled to the industry certifications upon completion of the Program. Rather, if they wished to obtain the certifications, the students would be required to complete additional course work administered by the individual industry bodies, paying potentially thousands of dollars more in tuition, in addition to the costs of the examinations as set by the individual industry groups.           

In response to complaints from the students, GBC first changed the online version of the course calendar, and then some months later, the hard copies, to clarify that if a student chose to pursue further studies at some future point, he or she must apply to those industry groups to obtain qualifications.

However, GBC refused to refund the students' tuition, arguing that the students could have easily determined that each of the certifications required further courses and examinations, and that the students had already benefited from the Program.

Certification Stage

The students brought the Class Action claiming that GBC negligently misrepresented the value of the program, that GBC had breached section 14 of the Act, and that GBC had breached its contractual obligations to the students. At the certification stage, Mr. Justice Strathy certified claims in negligent misrepresentation, breach of the Act, and breach of contract.

The certification of the misrepresentation case itself is noteworthy. In Canada, to establish negligent  misrepresentation under the common law, a plaintiff must meet a five-part test established in Queen v. Cognos [1993] 1 S.C.R. 87.

1. A duty of care exists based on a special relationship between the representor and the representee
2. The representation must be untrue, inaccurate or misleading
3. The representor much have acted negligently in making the misrepresentation
4. The representee must have relied, in a reasonable manner, on the negligent misrepresentation; and,
5. Reliance must have been detrimental to the representee in the sense that damages resulted.

The "reliance" requirement has made negligent misrepresentation a notoriously difficult cause of action to certify in class proceedings. The very individuality of the reliance requirement has meant that most courts have been unwilling to certify negligent misrepresentation as a common issue.

The plaintiffs in GBC did not include "reliance" as one of the common issues, but rather "carefully tailored" them to include only the first three parts of the Cognos test, leaving reliance and damages to be individually adjudicated. In this context, at the certification stage, Mr. Justice Strathy found that, because the same representation was made to all the putative plaintiffs, the GBC representation was at the "positive end of the spectrum of misrepresentation cases that are appropriate for certification."   

Common Issues Trial

Negligent Misrepresentation

With reference to the negligent misrepresentation claim, since the plaintiffs carefully drafted their common issues at the certification stage to avoid having to deal with "reliance" as a common issue, Mr. Justice Belobaba did not need to consider whether the students reasonably relied on the representations. His Honour found that GBC had a special relationship with the students, and had made a false representation.

However, Mr. Justice Belobaba also found that the students were entitled to reasonably rely on representations in the course calendar without doing additional research into the industry certifications, even though he also found that the industry websites gave students ready access to information that could have contradicted the GBC course calendar.

This portion of the decision is troubling because it suggests that to establish the "reasonableness" of reliance, the students had no obligation to undertake any further investigation even where information is readily available.

Breach of Consumer Protection Act

Section 14 of the Act provides that it is "an unfair practice for a person to make a false, misleading or deceptive representation." Legal liability is established merely by the finding that the false or misleading statement has been made. No evidence that a consumer actually relied, or that the reliance was reasonable, is necessary under the Act. The Act lists examples of false statements including "a representation that the person who is to supply the goods or services has sponsorship, approval, status, affiliation or connection the person does not have."

Justice Belobaba concluded that GBC's representation was misleading under the Act, and that GBC knew it did not have authority to issue the certifications, or to otherwise claim affiliation with the industry groups. Consequently, Justice Belobaba concluded that the students were entitled to relief under the Act.

Section 18 of the Act provides that a consumer may rescind the agreement, or as in this case, where rescission was not possible in that Justice Belobaba found that the product had already been "consumed," a consumer "is entitled to recover the amount by which the consumer's payment under the agreement exceeds the value that the goods or services have to the consumer or to recover damages, or both." His Honour declined to comment on how damages would be calculated, leaving that to the damages stage of the litigation.

Mr. Justice Belobaba's conclusion that GBC breached the Act is perhaps not as significant to colleges and universities as his finding at the common issues trial that a student is a "consumer" pursuant to the Act.

Much of the decision turned on the analysis of whether the definition of "consumer" — an individual acting for personal, family or household purposes and not including a person who is acting for business purposes — included students.

GBC took the position that the students, as business students, were not "consumers" because they took the courses for "business purposes." Mr. Justice Belobaba contrasted the definition of "consumer" with the definition of "business purpose." Reviewing recent changes (enacted in 2002) to the Consumer Protection Act, Mr. Justice Belobaba reached the conclusion that if the legislature had intended to re-write the core definition of consumer "one would have expected more explicit language in the statute to this effect."

His Honour noted that students were repeatedly mentioned as "vulnerable" in the debates surrounding the legislative changes. He concluded that neither college business courses, nor student loans to take those courses "are transactions that were meant to be ousted from the protection of the new CPA," and that in order to be excluded from the definition of "consumer," "one has to be carrying on an existing business before one loses protection of the CPA."

What Next?

The decision of Mr. Justice Belobaba is currently under appeal. Nevertheless, the decision represents a potentially significant broadening of the reach of the Consumer Protection Act, as well as an opportunity for the broadening of negligent misrepresentation claims in the class-action context.

We can expect that other plaintiffs will attempt to ply these same, now charted, waters. That one of the essential requirements of negligent misrepresentation need not be addressed until after the common issues trial will be troubling to defence counsel, as will the implications of Mr. Justice Belobaba's finding that students need not conduct any further investigation of a claim, even when contradictory details are readily available online.

However, the case is particularly troubling with respect to the potential implications for colleges and universities because of the interpretation of "consumer" under the Act. In an age when college and university resources are dwindling, competition for students is ever more fierce, and the amount of information distributed by educational institutions is enormous, colleges and universities would do well to carefully monitor all their communications.

This may be the first case to deal with these particular issues, but it certainly won't be the last.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.