Background
Over the last decade, there has been considerable discussion around the nature of the relationship between universities and their students, and particularly the possible application of the ACL to that relationship. Historically the conduct of public universities, being established under statute, was not considered to be subject to these types of statutory consumer protections. However, significant changes in the higher education sector, including in relation to the way universities are funded and compete for students, has meant that the possible application of the statutory protections that are now found in the ACL to university activities needs to remain under review and assessed on a case by case basis when claims are made.
Central to any discussion concerning the application of the prohibition on misleading or deceptive conduct in the ACL is whether the threshold requirement – that the conduct complained of occurred 'in trade or commerce' – has been met. The principles governing the construction of this phrase are set out in Concrete Construction (NSW) Pty Ltd v Nelson1 where the Court held that the expression refers only to "conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. … the expression refers to 'the central conception' of trade or commerce and not to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business."2
The question whether the activities of public universities are undertaken 'in trade or commerce' has been the subject of considerable academic debate.3 Universities engage in a broad range of activities not limited to their core role as educational service providers. Many of these activities, such as the buying and selling of real estate and the licensing of intellectual property, are clearly of a commercial character and are regulated accordingly.4 It is also generally accepted that the promotional activities of universities are similarly trading activities and universities may well be liable for any misleading or deceptive conduct engaged in in the course of marketing the educational services which they provide for a fee.5
More vexed, however, and the subject of the rest of this article, is the question whether the provision of educational services by public universities within the statutory framework is an activity engaged in in trade or commerce.
The consequences of a changing legislative landscape
That the provision of educational services was conduct pursuant to a statutory obligation rather than a commercial activity was (almost) beyond question under the funding arrangements provided for by the Higher Education Funding Act 1988 (Cth). Pursuant to this Act, funding for higher education providers was strictly regulated. This changed on 1 January 2005 with the commencement of operation of the Higher Education Support Act 2003 (Cth), which marked the beginning of the deregulation of the higher education sector (something that has continued to the present day).
Whereas previously the number of Commonwealth supported places and the fees charged by universities for their tuition services were set by the Commonwealth, under the current 'demand-driven' funding model, the Commonwealth Grants Scheme, it is the university which decides how many domestic students they enrol, and, within limits, what fees they will charge. One of the consequences of these changes is that universities now compete for students. The emergence of a 'competitive market' lends some support for the conclusion that the provision of educational services falls within the ambit of conduct engaged in 'trade or commerce'.6 In particular, under the current funding model universities impose a discretionary fee, rather than a statutory charge, for the provision of educational services, leading some writers to conclude that universities now provide services to both full-fee paying and HECS-paying students 'in trade or commerce'.7
Recent Judicial Consideration
The issue of whether the provision of certain services to a doctoral student by a public university was regulated by the ACL has been the subject of recent Federal Court judicial consideration.8
In that matter the conduct of the university alleged to be in breach of the ACL related to the dealings the university had with a Commonwealth-supported doctoral student. The student argued that the university's failure to provide supervision for research to be undertaken as part of his candidature was a breach of the consumer protection provisions of the ACL.
In response, the university submitted (among other things) that given the funding of the candidature was granted for the express purpose of supporting the training of research students and was provided under legislation that was enacted with the object of supporting the Australian higher education system, its conduct was engaged in as part of its education functions under its governing legislation, rather than for any commercial purpose.
While ultimately finding it unnecessary to decide this question, her Honour Justice Collier did indicate that she was not persuaded by the university's submission. In obiter, her Honour expressed tentative support for the conclusion that, at least in the circumstances of this case, it was arguable that the university's conduct was of a commercial nature.11 In reaching this conclusion, her Honour noted that this position departed from the historically held view of the court that the provision of educational services by a public university was not conduct engaged in 'in trade or commerce'.12 However, her Honour considered it was significant that none of these decisions referred to had been decided in the wake of the 1 January 2005 reforms. Her Honour was ultimately persuaded by the arguments of writers, such as Professor Corones and Professor Jackson,13 that the changes to how universities were funded had altered the context in which universities provided educational services.10
The question of the application of the ACL to the relationship between universities and their students (and whether a contract exists) is also increasingly being ventilated in our State-based civil administrative tribunals, although it is not always possible to obtain copies of the decisions made. In one such case last month, a student argued in the NSW Civil and Administrative Tribunal that an alleged failure of the university to provide feedback on an assignment triggered the application of the ACL. The Tribunal rejected that argument on the basis that giving feedback on an assignment was so far removed from the university's commercial services that it could not properly be characterised as 'in trade or commerce'.
Conclusions
Academic, practitioner and judicial writing suggests that the argument that the provision of educational services by a university is entirely sequestered from its 'trading' or 'commercial' activities is no longer tenable. Instead, the writing in this space (including judicial comments in obiter), place these types of activities squarely in the cross-hairs of the ACL.
But just how far could this reasoning extend?
- Does it mean that a university is now potentially exposed under the ACL if a student asserts that an academic gave 'misleading' representations about the likely content of an exam?
- Or if the student considers the content of lectures is of such a low quality that it breaches statutory consumer protections in the ACL?
- What if a doctoral student was dissatisfied with the quality of supervision for her candidature?
We consider it unlikely that any of these examples could properly be characterised as 'in trade or commerce'. They are in our view all examples of conduct engaged in as part of a university's education functions under its governing legislation, rather than for any commercial purpose. This can be contrasted, for example, to representations by a university to prospective students, seeking to attract applications for enrolment in competition with other higher education providers.
However, the writing in this area demonstrates that there is a divergence of views on where to draw the line in terms of conduct of universities that is likely to be subject to the consumer protections in the ACL. There is some danger in making broad-brush statements about whether, for example, the prohibition on misleading or deceptive conduct in the ACL extends to students as 'consumers'. Rather, a university's activities must in each case be examined carefully to consider whether particular conduct is 'in trade or commerce'. That is particularly the case when examining a university's conduct vis-à-vis its students, as it is a core statutory function of all public universities in this country to provide educational services (relating to teaching and research) to their students.
Given the increasing number of claims brought by disgruntled students against universities, it seems likely that we will start to see cases in which the Court is required to do more than make comments in obiter on whether the consumer protections contained in the ACL apply to particular alleged conduct. The development of a body of case law, in which the application of the ACL to various factual scenarios the subject of claims by students against universities, will give greater certainty about the types of conduct likely to trigger the application of the consumer protections in the ACL.
1(1990) 169 CLR 594.
2(1990) 169 CLR 594 at 603.
3Professor Jim Jackson, Regulation of International Education: Australia and New Zealand” (2005-2006) 10(2) & 11(1) Australia & New Zealand Journal of Law & Education 67; Professor Stephen Corones, 'Consumer guarantees and the supply of educational services by higher education providers' (2012) 35(1) UNSW Law Journal 1; Philip Clarke, 'University marketing and the law: the application of the Trade Practices Act 1974 (Cth) (2003) 8 Deakin Law Review 304; Helen Fleming, 'Australian Consumer Law Reforms: Implications for the University and Student Relationship' (paper presented at the Annual Conference of the Society of University Lawyers, Adelaide Convention Centre, 4 November 2011); Patty Kamvounias and Sally Varham, 'Getting What They Paid For: Consumer Rights of Students in Higher Education' (2006) 15(2) Griffith Law Review 306; Paul Luttrell, 'The Relationship Between the University and its Students and the Enforceability of University Policies' (paper presented at the Annual Conference of the Society of University Lawyers, Deakin University, 31 October 2014).
4See, Quickenden v O'Connor (2001) 109 FCR 243 at [48]-[51]; see also Fleming at 3.
5Fennell v Australian National University [1999] FCA 989 and Dudzinski v Kellow [1999] FCA 390; see also Clarke at 307 and Jackson at 76.
6See Corones at 6.
7Cornoes at 6, see also Luttrell at 29.
8Mbuzi v Griffith University [2014] FCA 1323.
9See Higher Education Support Act 2003 (Cth), s 2-1.
10[2014] FCA 1323 at 116.
11[2014] FCA 1323 at 116.
12[2014] FCA 1323 at 112, see further Mathews v University of Queensland [2002] FCA 414 at [23] ("Assuming that the representations were made, it is likely that the representations were not in trade or commerce"); Quickenden v O'Connor (2001) 109 FCR 243 ("the traditional role of a university in undertaking educational and research activities would not appear to be within the conventional concept of 'trading' even when those services are provided for a fee at or near their commercial cost … . It is questionable whether the provision of educational services within the statutory framework of the Higher Education Funding Act amounts to trading.")
13[2014] FCA 1323 at 116.
