In the ruling, judges warned of the dangers of "high- spirited" young men taking risks with their own safety.
Luke Ratcliff, now 23, of Cambridge, was left paralysed with tetraplegia after hitting his head on the bottom of the swimming pool at the Harper Adams Agricultural College in Newport, Shropshire, where he was a student.
Lords Justices Stuart-Smith, Thorpe and Mummery, sitting in the Court of Appeal in London, said that the 1994 accident had the "most appalling consequences". But they allowed an appeal by the college against a High Court ruling that Mr Ratcliff was entitled to damages against it. Damages had been estimated at more than pounds 1m.
Lord Justice Stuart-Smith said yesterday: "It is unfortunate that a number of high- spirited young men will take serious risks with their own safety and do things that they know are forbidden ... But, if the risk materialises, they cannot blame others for their rashness."
The accident happened in the early hours of 8 December 1994, when Mr Ratcliff and two friends dived into the open-air pool at the college after attending a disco.
The judge said Mr Ratcliff admitted that the college had told him the pool was closed and held dangerous chemicals, and that he was not drunk when he decided to dive in.
The college authorities had denied liability, arguing that he had shown complete disregard for his own safety and behaved with "utter recklessness" when he dived into the pool.
Lord Mackenzie of Framwellgate, who has criticised the growth of the "compensation culture" among police officers, welcomed ruling as "common sense". He said: "I've always respected the courts for being the bastion of common sense and this case reflects that.
"I think there's a danger of this country going down the same route as the Americans and becoming a very litigious country. It's particularly worrying if it's public money being spent funding these actions, money which would be better spent funding other things."
n A 12-year-old girl left brain damaged at birth was yesterday awarded a pounds 2.2m settlement in the High Court. West Berkshire Health Authority accepted liability and agreed the package, which will provide care for the girl from Swindon, Wiltshire.Reuse content