Australia: Australian universities' potential liability for courses that fail to deliver

In brief - Educational negligence claims in Australia, how likely are they?

In Australia, a successful claim by a student for compensation for careless or incompetent teaching practices may well be just a matter of time. Universities should consider taking steps to mitigate their risk against such claims.

Competition and deregulation are impacting the Australian education sector

Education is big business. Figures released from the Australian Bureau of Statistics show that the industry grew by more than $2 billion in 2015 and is our biggest service export, with income reaching a record high of $19.2 billion in 2015.

The education sector is also increasingly competitive. Deregulation has meant that Australian universities have had to become more and more financially self-reliant, due to a persistent and gradual decrease in government funding. Universities aggressively compete with each other to attract the best students locally and overseas, using glossy marketing schemes and increasing places in popular courses to obtain enrolments. An article in The Age newspaper on 13 August 2016 highlighted the issue of funding in universities and reported that many institutions are funnelling students into more profitable courses such as law degrees (which have high fees but are relatively cheap to run) so as to subsidise research or more expensive courses such as veterinary science.

Does the drive to attract more students and make more money have an impact on the quality of the courses on offer at universities? Do students expect more from courses and are they more inclined to initiate legal action against the university if they consider that the course is inadequate or not as promised?

Common sense dictates that this is the case, which brings into focus the potential liability of universities in respect of actions brought by dissatisfied students. In Australia, no-one has successfully pursued a case in educational negligence but this is only a matter of time given the educational climate described above.

In the United States and the United Kingdom, the liability of educators for inadequate teaching has centred on two main causes of action: negligence and misrepresentation. In Australia, there is no decided case involving an action in educational negligence, and very little in the way of misrepresentation, but there is the real prospect of claims against universities in accordance with established principles, as summarised below.

Educational malpractice claims consistently denied by US courts, but for how long?

Historically, educators have not been included in the ranks of other professionals such as lawyers, doctors and accountants who have always been susceptible to a claim for damages if their professional services did not meet the expected standard of care.

In the United States, courts have taken the view that for reasons of public policy (the fear of "flood of litigation" and overburdening the schools) and the alleged difficulty in setting an appropriate standard of care in teaching, in establishing causation and framing an appropriate measure of damages, claims for "educational malpractice" should be denied. A number of actions were brought for educational malpractice in the 1970s (see Peter W v San Francisco Unified District., 60 Cal. App. 3d 814, 131 Cal. Rptr. 854, 859 (Ct. App. 1976) and Donohue v. Copiague Union Free School Dist., 391 N.E.2d 1352) which were consistently denied by the courts and this view has continued to recent times (see Gomez-Jimines v. New York Law Sch., No. 652226/11 (N.Y Sup Ct. Mar. 21. 2012); Love v. Career Educ. Corp., 2012 WL 1684572 (E.D. Mo. May 15, 2012).

Interestingly, on 20 November 2016, an announcement was made that US President-elect, Donald Trump has agreed to settle lawsuits related to his Trump University for USD $25 million. The suits alleged that the real estate-related seminars failed to deliver the education they promised. Whilst Mr Trump tweeted after the news of the settlement that he would have prevailed in a court proceeding, it perhaps indicates a changing legal climate in this area going forward.

Negligence claims in UK show steady growth, particularly against schools offering facilities for special needs children

In the United Kingdom, a different approach has been taken. In the landmark House of Lords case in Phelps v Hillingdon London Borough Council; Anderton v Clwyd County Council; Gower v Bromley London Borough Council; Jarvis v Hampshire County Council [2000] UKHL 47 (these were a number of cases that were very similar in substance so were heard together by the House of Lords), the Court held unanimously that claims for educational negligence could be brought. In the Phelps case the plaintiff sued the local education authority and the educational psychologist for failure to diagnose her dyslexia when she was at school. As a result she was never put into an appropriate learning program, so by the time she was an adult and had left school, her reading skills were that of a young child. She was therefore unable to obtain gainful employment in her adult years. The House of Lords found that there was a direct duty of care between the educational psychologist and the plaintiff because the psychologist was specifically asked to give advice on the child's needs and make recommendations which she understood would be followed by the parents and the school. In addition, the local education authority was vicariously liable for the breach of duty of care of the psychologist. In contrast to the US courts, the House of Lords held that public policy grounds should not prevent such claims.

It is to be observed that allowing such claims in the UK has not resulted in opening the floodgates but rather a steady growth in educational negligence claims, primarily against schools and in the context of affording particular facilities to children with special needs. The cases are still very hard to prove because of the difficulty in establishing a causal link between the breach of the duty of care and the consequential loss. Interestingly, a judgment is expected later this month from the High Court with respect to a claim made by a graduate against Oxford University for 1 million pounds. The graduate is alleging that the negligent teaching of a particular subject he took in 1999-2000 pulled down his overall grade and cost him first class honours. He further argues that his life and career have been blighted by his failure to obtain a first when he graduated in 2000. If the graduate is successful it will significantly broaden the scope of educational negligence cases that have been permitted in the UK courts to date.

Negligence claims in Australia are increasingly likely to affect schools and universities

In Australia there are no reported decisions. However, across a number of different professions, there has been an increasing legal accountability for the careless performance of professional work. Schools have an established duty of care to their students to protect their physical well being and it is possible the courts could apply similar principles to a claim for compensation by a university student who has been the victim of careless or incompetent teaching practices in breach of a duty of care to the requisite professional standard.

In such an action for negligence, the student would have to establish to the satisfaction of the court the following elements:

  1. the student was owed a duty of care by the educator
  2. that the education provided failed to meet the appropriate standard of care, and
  3. that failure caused the student to suffer injury of a type that is compensable under the usual principles

Determining whether a duty of care is owed to a student by the educator

One challenging issue will be whether the courts are prepared to find that a duty of care is owed to students by university educators where a student suffers pure economic loss (rather than physical injury or damage to property) as a result of a poorly taught course. Depending on the circumstances, the loss could be the course fees and perhaps lost or diminished job opportunities. For a duty of care to be established, damage to the plaintiff of the kind suffered should be reasonably foreseeable (see Donoghue v Stevenson [1932] UKHL 100). The inquiry involves consideration of what a reasonable person in the position of the defendant would have foreseen as potential outcomes connected with his or her (or in the context of a university, its) behaviour.

Australian courts have found that there are three key issues that need to be considered in imposing a duty of care in a case involving economic loss:

  1. vulnerability of the plaintiff
  2. indeterminacy of liability
  3. the defendant's knowledge of the risk that the conduct will cause harm to the plaintiff

1. Vulnerability of the plaintiff

What is meant by the vulnerability of the plaintiff was described by the majority of the High Court in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 as follows:

'Vulnerability', in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, 'vulnerability' is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of the defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant.

It was also observed in Woolcock that an assumption of responsibility for the plaintiff by the defendant and knowledge by the defendant that the plaintiff is relying on the defendant may be part of, or an indicator of, the plaintiff's vulnerability (It does not appear to be necessary to plead and prove that the defendant had knowledge of the plaintiff's vulnerability: Reichel v Paulyn Investments Pty Ltd [2008] VSC 413.) The defendant's control over the plaintiff's circumstances may also be a consideration. The degree and nature of vulnerability required, however, will vary depending on the circumstances of the particular case.

It would not be difficult to argue that a student is dependent upon the university to provide the course up to a reasonable standard so that the student acquires the necessary skills to go into the market place and obtain employment. The university has a large amount of control over the dispensation of knowledge via provision of the course and subject to the student being required to do work experience or research as part of the course, the student's sole source of learning is via the course provided by the university and it would have knowledge of this fact.

However, it is important to note that:

While vulnerability is an important factor in whether or not a duty of care to guard against economic loss is owed, it is not the sole consideration. On current jurisprudence, the decision that a duty of care is owed or is not owed is arrived at in novel circumstances upon a "multi-factorial" approach, with close analysis of the facts bearing on the relationship between the plaintiff and the defendant and regard to "salient features"... (See Western Districts Developments Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283 at [10].)

2. Indeterminacy of liability

On the question of indeterminacy of liability (being "liability in an indeterminate amount for an indeterminate time to an indeterminable class", Ultramares Corp v Touche, Niven & Co 174 NE 441 (1931)), it has been noted:
..it is not the size or number of claims that is decisive in determining whether potential liability is so indeterminate that no duty of care is owed. Liability is indeterminate only when it cannot be realistically calculated. If both the likely number of claims and the nature of them can be reasonably calculated, it cannot be said that imposing a duty on the defendant will render that person liable "in an indeterminate amount for an indeterminate time to an indeterminate class". (Perre v Apand [1999] HCA 36 at [107])

In respect of a university student, it should be relatively straightforward to calculate the loss as the course fees. If the student was to argue that it affected his or her job prospects, the liability becomes more difficult to assess.

3. Defendant's knowledge of the risk

As to the issue of the defendant's knowledge of the risk that the conduct will cause harm to the plaintiff, the likelihood in succeeding will be greater if the defendant actually knew of the risk.

What is the appropriate standard of care?

If a duty of care exists, another unresolved issue is the appropriate standard of care. Education and what it means in any given context can be subjective and fact-specific: subjects can be taught in so many different ways, applying different educational theories and beliefs for different courses and students. For example, in E (a minor) v. Dorset County Council & Other Appeals [1994] 4 ALL ER 640, the English Court of Appeal described the applicable standard of care of teachers as one consistent with their skilled calling, requiring them to show reasonable care and skill befitting their professional experience and qualifications. This case referred to school teachers - not university lecturers, but the principles are similar.

Did the failure to exercise the duty cause the loss?

Another potentially difficult issue will be ascertaining whether the damage suffered by a student was caused by a breach of duty of care. For example, in the university context, the impact of a poorly taught subject or course on a student's abilities or job prospects or to carry out future work may be difficult to ascertain amongst a number of other possible conditions or causes. There could be a myriad of different reasons to explain diminished abilities or prospects.

Misrepresentation and actions for misleading or deceptive conduct, or breach of contract

An alternative cause of action for students may be misrepresentation at common law, or its statutory analogue, misleading or deceptive conduct.

At common law, an actionable misrepresentation may be a written or verbal statement made by the university which takes the form of information or advice and is either fraudulent, negligent or innocently inaccurate and induces a person to take a certain course of action. A misrepresentation may take effect as an implied term of a contract or even a collateral contract.

Potentially, in the university context, a misrepresentation could concern matters such as class sizes, details of assessment, timetables, supervision, grading, the suitability of a course as a qualification to enter a particular profession or to equip a student with particular skills and prospects. The student might argue that the effect of the misrepresentation is a breach of contract and the remedy would generally be rescission of the contract with the scope to argue for damages under common law being limited to fraudulent misrepresentation.

There is wider scope to claim damages and other relief under consumer protection legislation such as the Competition and Consumer Act 2010 (Cth) and the equivalent Fair Trading Acts in the states. There are various causes of action under the legislation which could potentially apply, for example, an action for misleading or deceptive conduct or breach of contract. Additionally, some states and territories have legislation specifically targeting misrepresentation and providing a statutory claim for damages to the representee.

Tips for universities to minimise risk of negligence and misrepresentation claims

The proliferation of university courses, the desire to attract students, the perception of universities as purveyors of courses for a fee and the modern condition of litigating all create conditions which are ripe for possible claims against universities by students dissatisfied with their courses. As analysed in this article, although there have been few decided cases to date, there is the potential for universities to be sued and be held liable in negligence and misrepresentation in accordance with established principles.

In order to minimise the risks outlined above, some practical tips for universities to adopt are as follows:

  • carefully checking all marketing material to ensure that there are no "over blown" statements regarding courses and future job prospects
  • ensuring that each faculty is well managed and that staff are always supported so that courses run smoothly and on time
  • having in place good quality control procedures with respect to staff and course materials
  • carrying out random supervision of lectures to ensure that they are being delivered at the expected standard
  • obtaining feedback from students during or at the completion of a subject
  • communicating with staff members to ensure that they feel adequately supported
  • having back up plans when staff members are ill or on leave for extended periods

Caroline Cohen
Education law
Colin Biggers & Paisley

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.

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