Is this not common elsewhere?
But the case seem different: the teacher in question actually took the tests from a given set and this set was known in advance.
This is silly of the teacher, not of the students.
It would be foolish to think otherwise. What's to stop a student to write down questions after taking an exam and pass on to his juniors? Since this cannot be prevented, the faculty must assume that all students have all previous questions as part of their study material.
Sometimes a professor knowingly reuses his old questions. In that case, the students should warn him: not for the professor, but for their own good. Because otherwise, they will be evaluated on less questions (since almost all students will answer old questions correctly whether they really know the subject or not).
The students made only one mistake here, and it was taking that course from this particular professor.