Artificial intelligence, the use of ChatGPT, and other platforms have become significantly widespread in business with the preparation of documents, emails, letters, reports and notes. There are even detailed summaries as to the process and steps required for different legal process’ including appeals, applications to set aside a Bankruptcy Notice, or how to register a foreign judgment in Victoria.  There have been circumstances where a client has tried to tell us that our advice in relation to a specific aspect of the law, or a specific process (for example, the bankruptcy process) in support of their view, was incorrect by providing a summary of the apparently correct position (which turned out to be incorrect).  In another matter, the other party provided their List of Authorities in an appeal where their citations were incorrect; some cases did not exist, and some citations referred to the incorrect court.  BEWARE: the use of AI generated documents in Court proceedings are fraught with danger, even if you are relying on the documents which have been filed by the other party.  Make sure you check all documents which have been prepared for the use in Court including submissions.  There have been numerous cases where Judges have pointed out the risks of using AI generated material and reliance on those documents in Court proceedings.

In the decision of JML Rose Pty Ltd v Jorgensen (No 3) [2025] FCA 976 (19 August 2025), Justice Wheatley warned about the risks of relying on AI generated material.

The brief facts of the case can be summarised as follows:

• There has been a history of litigation before this decision. Essentially, Leigh Jorgensen made an application for annulment of his bankruptcy – this was following a sequestration order which was made on 16 October 2024 (and an application to stay the sequestration order was dismissed on 29 November 2024 with a subsequent application to review the sequestration order which was also dismissed on 20 March 2025);
• The dispute first arose when a judgment debt was obtained on 29 June 2022 in the Magistrates’ Court in Queensland for legal fees owing to JML Rose of about $56,000 inclusive of interest and costs;
• On 9 August 2024, a Bankruptcy Notice was issued and served upon Mr Jorgensen, he failed to comply with the Bankruptcy Notice and a Creditor’s Petition was issued and returnable for hearing on 9 October 2024 (and after a short adjournment) and on 16 October 2024. A supporting creditor also appeared at the hearing;
• On 30 May 2025, the default judgment was set aside in the Magistrates’ Court of Queensland on the basis that Mr Jorgensen had a defence on the merits (notwithstanding the delay in making the application to set aside the default judgment);
• On 16 July 2025, the annulment application was issued. The grounds which were relied upon by Mr Jorgensen included, among other things, that:
• The judgment debt was set aside which removed the jurisdiction to make a sequestration order;
  • The bankruptcy notice was defective;
  • The sequestration order made in his absence;
  • The bankruptcy process caused unjustified and disproportionate harm.

In reaching his decision to dismiss the annulment application, His Honour made the following findings:

• The power to annul a bankruptcy under section 153B of the Bankruptcy Act 1966 (Cth) involves two elements (which are cumulative and the second element only arises if the first element is satisfied):

(1) The sequestration order ought not have been made; and

(2) The Court’s exercise of a discretion to make an order annulling the bankruptcy;

• The Judge examined a range of cases and the principles which apply in relation to annulment applications but specifically, Zaghloul v Jewellery & Gift Buying Service Pty Ltd t/as Nationwide Jewellers [2020] FCA 1045 regarding the factors relevant to the exercise of discretion including whether the debtor is solvent; he or she carries a heavy burden; any unexplained delay in making the application; a failure to attend the hearing to oppose the petition; whether there is any basis for finding the sequestration order should not have been made [at 31];
• The Judge was satisfied that there was an underlying debt to JML Rose (even though the default judgment was set aside) and a supporting creditor existed at the time the sequestration order was made. As Mr Jorgensen had not satisfied the first element, the discretion was not required to be exercised;
• However, Mr Jorgensen had failed to discharge his heavy burden in relation to his financial position and none of the discretionary factors weighed in favour of annulling the bankruptcy;
• However, importantly on the issue of AI generated documents, the Judge determined that Mr Jorgensen used AI to prepare his written and oral submissions. His Honour stated [at 7]:

It became apparent that Mr Jorgensen was using a form of generative artificial intelligence (AI), to assist with his written and oral submissions. Many of the case citations were inaccurate. Some of the purported quoted passages did not exist. Such matters are likely the product of “hallucinations”. There has been an approach, which I will adopt, of redacting false case citations so that such information is not further propagated by AI systems: Luck v Secretary, Services Australia [2025] FCAFC 26 at [14], Rofe, Hespe and Kennett JJ, see also Kaur v Royal Melbourne Institute of Technology [2024] VSCA 264 at [26] (fn19), Walker JA, cf Nikolic v Nationwide News Pty Ltd (T/as The Australian) [2025] VSCA 112 at [36]–[41], Beach JA.”;

• In this case, there were “many fake authorities, fabricated quotes and false propositions” [ at 105]. Critically, His Honour said that “the reliance on unverified materials produced by generative AI does have the potential to mislead the Court” [ at 101] and that “all persons appearing before the Court have a duty to verify that the case law and legislation referred to and relied on is accurate and that such materials actually exist” [at 103].

Therefore, it is important when participating in Court proceedings or using AI as a tool in relation to legal services, the use of the AI tools must be treated with extreme caution. Ascertaining documents which have been generated using AI tools is becoming more readily identifiable by the language, the layout, the use of bold and italicised text and the structured paragraphs.  The purposes of written and oral submissions to advance a legal argument are important to assist the Judge with the legal argument which is being advanced for a particular party with case law and legislation supporting those arguments.  There are serious ramifications if fake, false or fabricated case law and legislation are presented to support a litigant’s legal argument.

Catherine and her team can provide the necessary advice and assistance in this area where required (and hopefully you do not come across a bankrupt who is seeking to rely on fake case law to review a sequestration order or annul a bankruptcy!!).