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Government settles with Otago University

Government settles with University of Otago over dentistry case

The government and the University of Otago have reached a $13.6 million settlement in the dentistry court case, Associate Education (Tertiary Education) Minister Steve Maharey said today.

The University of Otago and former students had taken the court action following government funding decisions for dentistry made by then Education Minister Lockwood Smith in 1994 which they argued were unlawful. In April 2002 the High Court decided in favour of the Plaintiffs. The government lodged an appeal against that decision in order to preserve its position so it could consider whether it had broader implications and to allow time for a mutually agreeable settlement to be reached between the parties.

Steve Maharey said he is pleased that the Government, Otago University and the former dentistry students have now reached agreement.

“The Labour-led government realised the inequity of the previous government’s policy and took immediate steps (in January 2000) to bring the cost of dentistry study down. As a result of the additional funding provided dentistry tuition fees were halved from the 2000 academic year.

“The government continued with the case following the April 2002 ruling because we wanted to ascertain whether it had the potential to affect the ability to make decisions. We have decided to settle the case because we consider the risk of the case setting a precedent is minimal following Justice Goddard’s comments in her judgment that the case was 'unique', and the decision-making 'singular'.

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“Former dentistry students have been left with much larger student loans than should have been the case. The settlement provides more than $7.5m to ensure that we put this right for them.

“The settlement will also enable the University of Otago to upgrade equipment used in its School of Dentistry. Much needed capital investment was not able to be made by the University following Lockwood Smith’s decision to slash government funding for dentistry education. We have now also rectified this situation.

. . / 2 “With the introduction of new legislative provisions for funding, and the establishment of the Tertiary Education Commission, I am confident that a similar situation will not arise in the future. Recently enacted tertiary education legislation ensures that government funding decisions are guided by a Tertiary Education Strategy,” said Steve Maharey.

The University of Otago's Vice-Chancellor, Dr Graeme Fogelberg expressed his delight that the Dentistry claim by former students and the University itself has now been settled.

He said "it is regrettable that the mess created by the former National government has taken so long to tidy up. The Hon Steve Maharey inherited a difficult problem, totally not of his making. Had I been in his shoes I would certainly have taken the claims to Court". Dr Fogelberg further commented that the problem was, of course, created in 1994 by the previous National Government's then Minister of Education, the Hon Lockwood Smith. Despite being provided on countless occasions with information that clearly showed that his decision was incorrect Dr Smith and his colleagues steadfastly denied their mistake. As a last resort, the former students and the University had no choice, but to seek redress in the Courts.

In her judgment on the matter the Hon Justice Goddard said that Dr Smith's 1994 decision was "so erroneous that it could only be categorised as irrational". On any basis it was ultra vires. Dr Fogelberg further commented that it struck him as ironic that only recently National members have been calling for the resignation of the Minister of State Owned Enterprises, Mr Burton and the Chief Executive of New Zealand Post, Mr Toime. He said "I suggest that before criticising others the National Party gets its own house in order. After all Dr Smith has cost New Zealand taxpayers millions of dollars as well as creating an inordinate amount of stress for students and their families".

Dr Fogelberg added that the final settlement which has been reached was fair for both former students and the University. He concluded by saying that he has spent a huge amount of time on this matter and he is glad that it can now finally be put to rest.

Questions and answers: University of Otago dentistry court case

1. What was the dentistry court case about? In June 2000 the court case was filed in the High Court by Otago University and 461 current and former dentistry students against the Crown for judicial review and on common law grounds, alleging that the decisions of the previous government to reduce dental subsidies between 1995 and 1999 (inclusive) were unlawful.

In April 2002, the High Court decided in favour of the Plaintiffs. The government filed an appeal of the case in July to preserve its position and allow the negotiations for a settlement to be progressed.

2. Why was the court case progressed and settled? The government defended the court case because it considered that it had the potential to impact upon the government’s ability to make policy decisions.

The Government decided to settle the court case because it was clear from the April 2002 judgement that the dentistry decision would not create a precedent for future funding decisions.

3. Does the policy affect current students? In 1999 the Labour Party identified the inequity of dentistry funding provided to the University of Otago in its election manifesto. Immediately upon taking office the Labour-led government took steps to implement this policy and ensure that dental students paid no in more tuition fees than medical students are charged.

As a consequence, the only students affected by the policy change were those in participated in dentistry at Otago University between 1995 and 1999 (inclusive).

4. What is the value of the settlement? The total settlement is $13.6 million.

5. What does the settlement cover? The settlement provides $5.8m to offset the costs to students from the funding change and money to cover interest costs (currently estimated at $1.75m) . It also includes a payment to the University, of which a substantial proportion will be used for the dental school in upgrading equipment, as well as legal costs.

6. When will the students receive the money? The government is keen to progress the settlement as soon as is practicable. It is expected that the settlement will be paid to Otago University before Christmas. Otago University will be responsible for making the payments to the affected students.

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