The New Zealand government faces paying students and the University of Otago more than NZ$15 million (£4.6 million) after the High Court declared that the decision to cut funding to the university's school of dentistry in 1994 was invalid.
The university and more than 460 students and graduates challenged a decision by the then minister of education, Lockwood Smith, to save money by equalising funding for dental and medical education.
The subsidy for each full-time dental student was cut from NZ$40,334 per full-time student to NZ$25,001 over three years, forcing the university to raise tuition fees.
The court said that the decision resulted in dental education being underfunded by more than NZ$10.5 million - NZ$5.8 million of which was borne by students and the balance by the university.
The judgment held that the funding decision was flawed as it did not take into account that medics, for their clinical training, had access to hospitals funded through the health vote, while clinical training for dental students was funded from the education vote. Among the court's grounds for finding the decision invalid was that it was taken without any consultation with the university.
Graeme Fogelberg, Otago's vice-chancellor, said he was delighted. "The minister's unlawful decision led directly to a tripling of dental student fees, with a corresponding leap in dental student loans." Four out of five new dentists had student loans of more than NZ$80,000.
The university has also been awarded costs, which are expected to be in excess of NZ$100,000.
The current government, which increased funding for dentistry training soon after its election in December 1999, has yet to decide if it will appeal the court decision.