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AI Gone Rogue: Court Sanctions Lawyers for Fake Cases

In Mertz & Mertz (No 3) [2025] FedCFamC1A 222, the Federal Circuit and Family Court of Australia took an unprecedented stance on the misuse of Artificial Intelligence in family law litigation. The case serves as a cautionary tale for legal practitioners about the unverified use of generative AI in preparing submissions. When counsel submitted documents containing fake authorities and inaccurate case citations, the Full Court not only ordered costs against the appellant but also referred the lawyers involved to their respective professional conduct regulators. This decision sets a critical precedent on technological responsibility and professional ethics in modern advocacy.

Facts and Issues

  • The appellant filed an appeal which was discontinued two days before the hearing.
  • During preparations, the appellant’s legal team—comprising a solicitor and two barristers—used AI tools to generate a Summary of Argument and List of Authorities.
  • The AI-generated material contained non-existent and misleading citations, which were later amended without clear explanation.
  • The Court identified a lack of transparency and accountability in how the AI was used and questioned the supervision of junior staff.
  • The respondent sought costs due to wasted preparation and requested disciplinary referral.

Key Issues:

  1. Whether the use of AI-generated submissions containing false citations constituted professional misconduct.
  2. Whether the appellant’s discontinuance warranted a party-and-party costs order.
  3. What professional obligations arise from the use of AI in legal practice.

Application of Law to Facts

The Court referenced several key authorities and guidelines to frame its reasoning:

  • Dayal [2024] FedCFamC2F 1166 — where a practitioner was referred to regulators for submitting AI-generated fake cases, establishing that lawyers must verify any material produced by AI.
  • Helmold & Mariya (No 2) (2025) FLC 94-272 — warning that “reliance upon unverified research generated by AI has the capacity to confuse, mislead, and waste judicial time”.
  • The Family Law Act 1975 (Cth) ss 114Q and 114UB were cited concerning confidentiality obligations and costs discretion.
  • The Court also considered the Supreme Court of NSW Practice Note SC Gen 23 (2025) and the Supreme Court of Victoria AI Guidelines (2024) as persuasive ethical standards for AI use in litigation.

Applying these, the Full Court found:

  • The extent and nature of AI use were unclear, and the practitioners failed in their duty of diligence and candour to the Court.
  • The solicitor’s delegation to a paralegal, without adequate supervision or disclosure, breached professional standards.
  • The AI usage risked breaches of confidentiality, privilege, and the Harman undertaking, given the potential exposure of non-public information to third-party AI tools.
  • The appellant’s late discontinuance caused wasted costs and prejudice to the respondent, justifying an award of $36,955 in costs, plus $10,000 in additional costs for correcting the AI-related errors.

Judgment and Reasoning

The Court ordered:

  1. The referral of all involved practitioners—Ms G (solicitor), Mr AX KC, and Mr AY—to their respective professional regulatory bodies for investigation.
  2. A costs order against the appellant for $36,955 on a party-and-party basis, and a further $10,000 payable by Ms G personally for the AI issue.

Reasoning:

  • The Court emphasized that AI cannot be used as a substitute for human judgment or verification.
  • Practitioners remain personally responsible for every word submitted to the Court, regardless of technological tools employed.
  • Ethical and professional obligations—accuracy, competence, honesty, and respect for confidentiality—cannot be outsourced to AI.
  • The referrals were made not as punishment but to protect the integrity of the legal profession and ensure future guidance for AI governance in law.

Precedents and Authorities Cited

  • Dayal [2024] FedCFamC2F 1166 (AI misuse and referral).
  • Helmold & Mariya (No 2) (2025) FLC 94-272.
  • Family Law Act 1975 (Cth) ss 114Q, 114UB.
  • Supreme Court of NSW Practice Note SC Gen 23 (2025).
  • Supreme Court of Victoria AI Guidelines (2024).

Take-Home Lesson

This case marks the first appellate-level rebuke of AI misuse by Australian family law practitioners. It underscores that:

  • AI is not a research shortcut; unverified outputs can amount to professional misconduct.
  • Lawyers must disclose AI usage, verify every citation, and safeguard confidentiality.
  • Courts will sanction both the firm and individuals for negligence or lack of supervision in AI use.
  • Transparency, accountability, and human oversight remain the cornerstones of ethical advocacy in the digital age.

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