2004 BCSC 1299 MacDonald et al v. The University of British Columbia

Before: The Honourable Madam Justice Boyd

Reasons for Judgment

(In Chambers)

Counsel for the Plaintiff:	A.C. Ward and L. Tessaro
Counsel for the Defendant:	R.W. Sieg
Date and Place of Hearing:	May 20-21, 2004 and May 25, 2004
	Vancouver, B.C.

Introduction:

[1] The plaintiffs, 12 former MBA students at the University of British Columbia (the “University”) seek damages in the sum of $12,000 each, being the difference between the tuition fees originally quoted for the program, and the increased fees charged following the lifting of the Provincial Government statutory tuition freeze. The plaintiffs’ claims are based on the University’s alleged breach of contract, or in the alternative, on the University’s allegedly negligent misrepresentations to the students.

Background Facts:

[2] The defendant first offered a two-year (16 months of study over 24 months) MBA program in 1964. Between 1964 and 1995, the tuition fees rose incrementally from a low of $1350 to a high of $4362 in 1994. In 1995, when the program was restructured to a full-time 15-month course of study, the fees were increased to $7,000. At that point, the University’s plan was to increase tuition fees to $16,000 over the course of a “low-profile transit transition”. This plan was stymied however, by virtue of the provincial government’s imposition of a statutory tuition freeze (the “Tuition Freeze”), commencing in 1996.

[3] In 1997, the University wrote to the provincial government proposing an increase in MBA tuition fees, outside the freeze, initially to $15,000 and ultimately rising to $25,000. The government refused this request.

[4] In May 2001, the B.C. Liberal party came into power. During the course of the provincial election, the Liberal party’s policy platform included the maintenance of the tuition freeze for a period of one year, with no commitment to maintain the tuition freeze beyond that point. When the Liberal party won the election, Dean Muzyka (“the Dean”) of the Faculty of Commerce (“the Faculty”) assumed the provincial government would reconsider the tuition freeze and that there was a good chance it would be lifted after the one-year period lifted had expired.

[5] Anticipating the possibility the tuition freeze would be lifted at some point, the Faculty prepared its draft “offer of admission” letters, to be forwarded to those individuals whose applications for admission had been approved. The offer letter included a provision entitled “tuition fees” or “program fees” which provided as follows:

$7,000 CAN for 15-month program (payable in four instalments of $1750)

Fees for the year are subject to adjustment and the University reserves the right to change fees without notice.

*Student activity fees are also assessed. Please see attached information sheet and fees section of UBC Calendar.

[6] At this point in time, the University, including the Faculty and the Dean, did not know when or if the government might lift the tuition increase, how the provincial government might lift the tuition freeze, or whether the government would decide that the tuition freeze should continue beyond one year.

[7] The Dean believed that if the government did the lift the tuition freeze, whenever and if ever that might occur, the tuition freeze might be lifted in stages such that the total amount of increase in tuition fees would be restricted in some way.

[8] On February 11, 2002 the provincial government announced it would lift the tuition frees and give post-secondary institutions autonomy to set their own tuition fees.

[9] When the announcement was made, the Dean was advised by Dr. McBride, the Vice President Academic and Provost of the University, that the Board of Governors wished to deal with the issue of proposed tuition fees at its upcoming meeting scheduled for March 2002.

[10] Approximately the one week after the provincial government’s announcement was made, the Dean determined the Faculty should seek an increase in tuition to the level of $28,000 for the MBA program. Although a tutition fee of $28,000 was well below the cost to the Faculty of providing the MBA program and well below the market value for the program, he believed the $28,000 fee was a fair amount to charge for tuition.

[11] The Dean’s view was based on the preliminary budget work which had been conducted by the Faculty beginning in approximately October or November 2001 and which had continued until the date of the provincial government’s announcement. As the Dean noted in his affidavit:

The Faculty conducted this type of budgeting analysis in order to help determine the cost of providing education programs and the revenues the Faculty would have to generate in order to pay that cost. Such a budget was important, even in years where tuition fees were frozen, in order to help determine the viability of educational programs and, after the Policy was announced, to help develop an estimate as to what tuition fee level the Faculty might propose to the Board of Governors in the event that the Freeze was lifted by the provincial government.

[12] Given the short effluxion of time between the provincial government’s announcement and the meeting of the Board of Governors, the Dean had little time to consider the Faculty’s budgetary proposal, and thus he relied heavily on the preliminary budget work which had been done to prepare the proposal.

[13] The proposal was eventually discussed in a committee of Deans chaired by Dr. McBride. Following the Deans’ meeting, the proposal was in turn reviewed by the University’s Executive which then passed the proposal on to the Board of Governors for consideration.

[14] The Dean attended the Board of Governors meeting on March 14, 2002 in order to answer any questions the Board of Governors might have. I accept that throughout, the Dean’s only authority was to submit a proposal on behalf of the Faculty, which proposal the Board of Governors was free to approve or not approve.

[15] It is significant that during the meeting, there was a motion made to increase the tuition fee level for the MBA program from $7000 to $14,000, rather than the proposed $28,000. That motion was defeated and the Faculty’s proposal was accepted by the Board of Governors.

[16] At the meeting, the Board of Governors noted that as a result of the increases in the fees for both the MBA and the Law programs, the fee for the joint MBA/LLB degree would also need to rise. Accordingly, it was decided that a proposal regarding the tuition for the joint program would be presented at the next Board of Governors’ scheduled meeting in May, 2002. (At the May 16, 2002 meeting of the Board of Governors, the Board approved tuition fees proposals for the joint MBA/LLB program).

[17] The first notification of the tuition free fee increase was received by some, but not all of the plaintiffs, on Saturday, March 15, 2002, when Ms. Anne DeWolfe sent out an email advising the incoming students as follows:

The Board of Governors approved the proposed tuition fee of $28,000 CAD for the 15-month UBC MBA program for domestic and international students. We understand that this increase may come as a surprise, particularly for the incoming domestic students.

[18] The University subsequently arranged a financing package, with its principal banker, HSBC, whereby students could borrow up to $48,000 at prime plus 1%, to help with increased tuition.

Issues:

(i) Is the contract between the plaintiffs and the University void for uncertainty?

(ii) If the contract is enforceable, does the contract include an implied term that any change in tuition fees will be reasonable?

(iii) Is the University liable in damages for any negligent misrepresentation or failure to properly disclose material facts to prospective students?

(iv) Was the contract between the University and the students an unconscionable bargain which is therefore not enforceable?

(i) Is the contract between the plaintiffs and the University void for uncertainty?

[19] The first branch of the plaintiffs’ counsel’s submission concerned the proposition the contract between the plaintiffs and the University was void and unenforceable for uncertainty. The University’s counsel challenged the plaintiffs’ ability to mount such a claim, noting it is not reflected anywhere in the Amended Statement of Claim. To the contrary, the Amended Statement of Claim is clearly founded on the proposition there was an “agreement” between the parties (based on the plaintiffs’ acceptance of the University’s offer of admission letter), which agreement the plaintiffs’ say contained an implied term that the increase, if any, in the tuition fees, would be reasonable. Thus, the primary relief sought at the outset of these proceedings, was specific performance of the contract.

[20] I agree that in these circumstances, there is no proper basis to pursue a claim declaring the entire contract void for uncertainty and I will turn to the other branches of the plaintiffs’ case.

(ii) Should the Court imply a term of “reasonableness” for increases in tuition fees?

[21] As noted earlier, in the admission offer letter, under the heading Tuition, the “fine print clause” reads:

$7,000 CAN for 15-month program (payable in four instalments of $1750)

Fees for the year are subject to adjustment and the University reserves the right to change fees without notice.

[22] The plaintiffs submit the “fine print clause”, as written, is ambiguous. Accordingly, they submit the clause ought to be interpreted in the plaintiffs’ favour by implying a term that any adjustment to tuition fees would be reasonable. In interpreting the “fine print clause”, they say the word “adjustment” must be taken as modifying the word “change”—hence creating the ambiguity alleged by the plaintiffs. In other words, while the University was free to change the fees without notice, a proper interpretation of the clause supports the conclusion that such a change would be in the nature of an adjustment only. But what would be the extent of the adjustment?

[23] Mr. Ward notes that Webster’s Third New International Dictionary provides a number of definitions for “adjustment”, the most applicable of which include:

1. the act or process of adjusting: as a: the bringing into proper, exact or conforming position or condition, b: a harmonizing or settling…

2. settlement of a claim of debt in a case in which the amount involved is uncertain or in which full payment is not made…

5. a: a correction or modification of an account to reflect the actual condition at the close of a given period by means of journal entries recording accruals, correction of errors, and depreciation.

b: an increase or decrease…

[24] Relying on definitions 1 and 5, the plaintiffs say that an adjustment is meant to reflect an external or variable condition. In the absence of any disclosure from the University indicating its anticipated upper limits of adjustment, they submit a reasonable interpretation of the word “adjustment” would be a modification reflecting a routine, annual variation, the most obvious example of which is inflation. They say that reading the “fine print clause” as a whole, it cannot be argued a fee increase from $7000 to $28,000 was an “adjustment”.

[25] I am not persuaded that there is any basis for a finding of any ambiguity or uncertainty in this case.

[26] Even if it can be said that standing alone, the “fine print clause” in the offer of admission letter raises some ambiguity, (which I do not find), the clause, in my view, must be read in the context of all of the other documents referred to in the letter. Here, the Offer of Admission letter specifically referred each plaintiff to the fees section of the University’s Calendar .

[27] The offer of admission letter also noted that the Faculty had sent a letter to the applicant outlining the necessary actions which each plaintiff would have to fulfil in order to accept the University’s offer of admission to the MBA Program. This letter set out the payment procedure and the deadlines which each plaintiff was required to adhere to in order to accept the offer of admission. The letter provided that each plaintiff had to complete and return an enrolment response form and make two deposit payments. The letter notes:

…Both of these deposits are required to secure your position in our program and will be credited towards your first term tuition payment. Please note that the tuition fees for the year are subject to adjustment and the University reserves the right to change fees with minimal notice.

(my emphasis)

[28] The University’s Calendars, which were also referred to in the offer of admission letters, both for the academic years 2001-2002 and 2002-2003, also contained the following terms:

A student upon registering has initiated a contract with the University for payment of assessed fees.

…

The University reserves the right to change fees without notice.

(my emphasis)

[29] In light of all these documents, I am satisfied it was indeed an express term of the contract in question that the University could change the fees to be charged for the MBA program without notice. On the face of the documents, read together, I see no foundation for a finding of ambiguity and thus some need for an implied term of “reasonableness”.

[30] Nor in my view, is there any basis in law for the implication of such a term, since the circumstances in the case at bar do not fall into any of the three categories of cases in which such a term may be implied. (C.P. Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711).

[31] First, there is no basis for an implied term of “reasonableness” based on an established custom or usage. The contract is not silent with respect to the term sought to be implied. Further, there is no evidence of a custom or usage which would restrict the Board of Governors, in the exercise of their statutory duty pursuant to s. 27(2)(m)(i) of the University Act, to set and determine fees. To the contrary, the established custom or usage is that such fees are set by the University’s Board of Governors pursuant to their statutory authority in either the January or March meeting of the Board of Governors for the upcoming academic year.

[32] Second, there is no basis to imply such a term by fact, based upon the business efficacy or officious bystander tests set out in the second category described in CP Hotels (supra). It is crucial here to note that under the business efficacy basis of implication, it is irrelevant whether such a term is reasonable or desirable as leading to a more satisfactory result. It is not even a sufficient basis for the implication of a term that it would, in the Court’s opinion, be reasonable or even desirable. Rather the burden is on the plaintiffs to persuade the Court it is necessary to imply the term sought in order to give business efficacy to the contract. (Olympic Industries Inc. v. McNeill, (1993), 86 B.C.L.R. (2d) 273 (C.A.)).

[33] The test for implying a term is not whether the implication of the term is reasonable or whether the result of not implying the term would leave an unreasonable result from one party’s perspective. If the contract works without the proposed term, then there is no basis for implying it under the business efficacy test. (Federal Commerce and Navigation Co. Ltd. v. Tradax Export S.A., (1977) 1 Lloyd’s Rep. 217 (Eng. C.A.), on appeal (1977) 2 Lloyd’s Rep. 301 (H.L.))

[34] Finally the business efficacy test requires that the proposed term be “obviously” required in order to give effect to the presumed intentions of both parties and not merely that it would be reasonable to imply or that it would likely be more satisfactory. (MJB Enterprises Ltd. v. Defence Construction (1951) Ltd., (1999) 1 S.C.R. 619 (S.C.C.); Manpar Enterprises Ltd. v. Canada (1997) 33 B.C.L.R. (3d) 203 (S.C.); on appeal (1999) 67 B.C.L.R. (3d) 64, 1999 B.C.C.A. 239 (B.C.C.A.).

[35] Likewise, there is no basis for implying the term sought by the plaintiffs on the basis of the officious bystander test. Implicit in such a test is the prerequisite that those parties must be presumed to have intended that the term should apply.

[36] As the University’s counsel noted in his submission:

If the University was asked at the time that the Contract was made whether the phrase “the University reserves the right to change fees” really meant “the University reserves the right to change fees and any such change shall be reasonable”, the University would not have said, “of course”. The University’s response could only have been that a change in fees would be determined by the University’s Board of Governors in the carrying out of its statutory power of decision “to set, determine and collect the fees…to be paid for instruction, research and all other activities in the University”. The University would not have agreed to restrain the Board of Governor’s exercise of its statutory power of decision.

[37] Nor am I persuaded there is any basis for implication by law of such a term of “reasonableness”. In Attaran v. University of British Columbia (1998) B.C.J. No. 115 (B.C.S.C.), Holmes J. considered an application for judicial review of the University’s fee increases. He noted at ¶ 38-41:

38. The Calendar provides “a student upon registering has initiated a contract with the University for payment of assessed fees; and the University reserves the right to change fees without notice”.

39. There clearly exists a contractual relationship between a student and the University. The student at registration is accepting the tuition fee contained in the Calendar and does accept the fees may change without specific notice.

40. The amount of the fee is however not a matter of contractual bargaining. The fees to be charged, and thereby form part of any contract between student and the University, arise from exercise of the statutory power vested in the Board under the University Act. Section 27(2)(m)(i) empowers the Board “to set, determine and collect fees to be paid for instruction, research and all other activities of the University”.

41. The Board when it “determines” the fee which will later be contractually binding upon student is exercising a “statutory power”…

[38] Relying on Attaran, I conclude that the University, through its Board of Governors, has the statutory power to set and determine tuition fees without restriction. Accordingly, there is no implication of law which supports the implied term proposed by the plaintiffs.

(iii) Negligent Misrepresentation by Omission:

[39] The heart of the plaintiffs’ case is their allegation the University deliberately or negligently withheld information from the plaintiffs, as prospective students, that the University planned to dramatically increase tuition fees for the MBA Program once the statutory freeze ended in or about February 2002. The plaintiffs say the University withheld this information since it was concerned that if the existence of the planned tuition fee increases was disclosed, the plaintiffs would not have pursued their applications for admission at UBC but rather would have sought admission at some other university.

[40] They say that Canadian universities all competed to attract the best MBA students. They say the plaintiffs relied on the University’s misrepresentations or withholding of information and that they have thereby suffered damages. They say that in this case all of the necessary elements for a claim based on negligent misrepresentation are present: a duty of care based on a special relationship between the parties, a misrepresentation, negligence by the representor in making the representation and finally, detrimental reliance by the representee (Queen v. Cognos Inc. (1993) 1 S.C.R. 87 (S.C.C.)).

[41] While it was not pursued at the hearing of the Petition, the Amended Statement of Claim includes a plea that the University owed the plaintiffs a “duty to act in the utmost good faith, a duty of care and a fiduciary duty to its present and prospective students”, who the University knew were in a position of financial dependence and vulnerability. While this plea was abandoned at the hearing of the Petition, the plaintiffs nevertheless submitted that the University had at least withheld from the students, its alleged knowledge that the tuition fees would be raised substantially in February 2002. The plaintiffs say they relied on this misrepresentation (by omission) and suffered damages accordingly.

[42] In particular, the plaintiffs rely on the evidence of Mr. Brendon Wilson, who attended a recruitment event for the UBC MBA program in the fall of 2001. They say his evidence supports the conclusion that as of the fall of 2001, one of the administrators for the program had presented the price of tuition for the upcoming 2002-2003 MBA program as $7000 and had not stated that this tuition level would be subject to any adjustment or increase. He deposed that at the recruitment event:

… I specifically asked one of the administrators for information on what the cost of the MBA program would be, in the event that the provincial government actually did lift the tuition freeze. To the best of my recollection, this administrator was Anne DeWolfe, the Assistant Dean and Director of Masters’ Programs. Ms. DeWolfe answered that tuition fees for the MBA program would not increase significantly, and that fees would be increased stepwise over a number of years. The gist of her answer was that there would not be any dramatic, one-time increase in tuition, but that the difference between the current price and future price or the cost of the program was recovered entirely from tuition would be implemented slowly and incrementally.

[43] In her affidavit, Ms. DeWolfe entirely rejects such a description of her presentation. She states at ¶ 11:

…although I cannot recall having any conversation with Mr. Wilson, I did not, at any time, during any of the presentations. I attended, advise anyone that the MBA program tuition fees would “not increase significantly”, nor did I advise anyone that “the fees would be increased stepwise over a number of years”. I can be certain that I did not say any of these things because at the time that I attended the events referred to I had no knowledge as to how or when the provincial government may lift the tuition freeze and I had no knowledge as to what tuition fee the Board of Governors might approve in due course. The best I could do whenever a student enquired as to the possibility that tuition fees might be changed was that we would have to wait to see what decisions the provincial government made in relation to lifting the tuition freeze. It was only after the faculty learned what position the provincial government would take in relation to the freeze that any concrete judgment could be made as to what potential fees would be proposed to the Board of Governors for the Board’s consideration.

[44] I note that Ms. DeWolfe’s evidence is corroborated by that of Ms. McNair, one of the plaintiffs, who notes at ¶ 16 of her Affidavit:

… at some time between November 2001 and the beginning of February 2002, I had gone to an information session held by the MBA program at the Hotel Vancouver. A number of students, including myself, had repeatedly asked the MBA program administrators who were making presentations, including Assistant Dean Anne DeWolfe, for a “ballpark” estimate of any tuition increase contemplated by UBC in the event of a change of provincial policy. The Assistant Dean had declined to give us any estimate, and told us that we would have to wait and see what the government allowed. I had no idea when I left this information session that an increase from $7000-$28000 was being contemplated by the administration.

[45] On a review of the affidavits in question, supplemented by the transcripts of the cross-examinations on their affidavits, I find that to the extent there is a conflict in the evidence of the University and the plaintiffs on this issue of “misrepresentation”, the conflict must be resolved in favour of the University. Ms. DeWolfe’s evidence is corroborated by that of Ms. McNair. Further, I find that Mr. Wilson’s other evidence that he tried to pay his $7000 tuition fee in full, on or about March 12, 2002, is entirely contradicted by his later admission on cross-examination that he only accepted the University’s offer of admission after learning that the tuition fees for the entire program was $28,000, a fact he only confirmed after March 15, 2002. Given this critical contradiction, I have some reservations concerning Mr. Wilson’s credibility and I therefore can not prefer his evidence to that of Ms. DeWolfe.

[46] In the end result, I am not persuaded that the evidence supports a finding that there were any discussions between the University and the Provincial Government regarding when or how the Tuition Freeze would end. The evidence of both Dean Muzyka and Ms. Anne DeWolfe is that they did not know what the government plans were. Nor is there any evidence that the University specifically planned to substantially increase fees once the Tuition Freeze was lifted. As I noted earlier, while there is evidence that the Faculty considered, during its budgetary exercise, what fee it might propose if the Tuition Freeze was lifted, no decision was finally made as to what amount would actually be requested until after the announcement by the Provincial Government to lift the Tuition Freeze without restriction. Nor of course, did the University have any knowledge of what the Board of Governors would do, in terms of accepting or rejecting the Faculty’s proposal.

[47] Most significantly, overarching all of this evidence, is the critical fact that the Board of Governors alone has and had the authority to make any decision regarding tuition fees to be set. Until such time as the Board of Governors made that decision on March 14, 2002, the University (and in particular, the Faculty) was unable to advise the students as to what the new tuition fee, if any, might be.

[48] In my view, none of the necessary elements for proof of a claim founded on negligent misrepresentation have been made out in this case.

(iv) Is the contract an unconscionable transaction?

[49] Relying on the decisions in Harry v. Kreutziger (1970) 9 B.C.L.R. 166 (B.C.C.A.), the plaintiffs submit that the Court ought to set aside the contract in question as one which is unconscionable. They say that here, as in Griffiths (supra) there is clearly “some inequality in the position of the parties” and further, that the bargain itself was improvident.

[50] Further relying on the decision in Griffiths v. New Westminster (2001) B.C.J. No. 2274 (B.C.S.C.) they say that in applying the factors listed by Burnyeat J., the Court ought to find the subject contract unreasonable and unconscionable.

[51] I am not persuaded that the Griffiths decision is of any assistance here. Like the decision in Davidson et al v. Three Spruces Realty Ltd. et al. (1977) 79 D.L.R. (3d) 481 (B.C.S.C.) on which it relies, both cases are ones involving a plaintiff seeking to overcome a limitation of liability or exclusion of liability clause contained in a contract. However, even assuming the clause in issue here is analogous to an exclusion of liability clause, I nevertheless find, on a consideration of the factors set out in Griffiths, that the contract in question cannot be found to be unconscionable. A review of the factors reveals:

(1) The contract was in a standard form and the specific terms were brought to the attention of the students;

(2) There were no negotiations as to the terms of the contract. The terms were subject to the Board of Governors retaining the authority to exercise its statutory power of decision and the plaintiffs agreed the University could change the fees. The student however were free to accept or reject the contract;

(3) The students’ attention was drawn to the clause in issue;

(4) The clause was not unusual in nature; it was the usage or practice of the Board of Governors to change fees and it did so from time to time pursuant to such a clause which reserve this right to the University;

(5) No representations were made by the University which would lead a student to believe that the clause did not apply. In other words there was nothing in the contract or in any representation made by the University that the University would not change the fees;

(6) Not applicable;

(7) Having regard to all of the facts, the enforcement of the clause would not be tacit approval by the Courts of an unacceptable commercial practice.

[52] I make this latter statement at (7) in light of this Court’s decision in Attaran (supra). There, it was held that the Board of Governors exercises its statutory power of decision making in keeping with its historical practice and the manner in which the University makes its decisions. The only foundation for a finding that the decision may be “unacceptable” as a matter of commercial practice, is the sheer size of the increase in tuition fees (ie. Quadrupling). However this evidence must be considered in the proper context, namely that the increase was made following a statutorily imposed tuition freeze, which had been in place for six years. The freeze had been imposed when the program itself had undergone substantial change. For some period, the fees had been set at a level substantially under cost and well below the market rate in other universities.

Conclusion:

[53] While each of the plaintiff’s circumstances are slightly different, all except Mr. Kevin Kearns, were aware of the increase in the fees shortly after the announcement was made in March 2002. Because of some difficulty with email, Mr. Kearns did not learn of the increase until August 2002, while attending a pre-core course. All of the plaintiffs attended or completed the MBA program.

[54] I have concluded that there is no foundation, either in contract or in tort to support the plaintiff’s claims. The action is dismissed.

“M.E. Boyd, J.”
The Honourable Madam Justice M.E. Boyd

Citation:	*MacDonald et al. v. The University of British Columbia,*
	2004 BCSC 1299