A case which looks at the risk of over reliance on AI and how, when used inappropriately, AI can lead to costly and embarrassing consequences for those involved.
Background
In March 2026, Pinsent Masons LLP (the Firm) was instructed to prepare a ‘block transfer’ application on an insolvency matter under The Insolvency (England and Wales) Rules 2016 (the Insolvency Rules). The purpose of the application was to remove a party from their role as administrator or liquidator in relation to these insolvency proceedings.
A matter such as this would usually be dealt with on papers and would not require a hearing before the Insolvency and Companies Court (‘ICC‘). Here the judge requested that the matter be listed following concerns about confusing documents presented by the Firm.
It is almost always the cover-up rather than the event that causes trouble.” Howard Baker
The Insolvency Rules
The ICC judge asked the Firm to detail which power the court had to order this proposed removal. In response, the Firm replied stating that the court had an express power to release under Rule 12.37(5) of the Insolvency Rules and quoted from this provision. This provision was a “surprise” to the judge, who was “unaware” of such a power, and upon checking the Insolvency Rules, found that they contained “nothing of the sort”.
Doubling down
The judge then demanded an explanation as to where the quoted provisions from the Insolvency Rules had come from, believing it to be an AI hallucination. An AI hallucination is where content is produced which appears to be correct, credible and informed, but is actually an entirely fabricated response by AI.
In April 2026, the Firm wrote to the court again, accepting that Rule 12.37(5) did not contain the provisions they had previously asserted. However, rather than apologising for the error and moving forward, they put forward the argument that by using the wording “which provides as follows” they had provided a “summary conclusion” of Rule 12.37 and that it should not have been taken as a “direct quotation” of the statute.
This was not a credible explanation, and in failing to provide an honest and truthful response to the first error, the Firm had “muddied the waters” further.
Technology is a useful servant but a dangerous master” Christian Lous Lange
Criticism
The judge did not hold back in his criticism of the Firm’s conduct, stating that they had misled the court on two occasions. He was “astonished” by the “cavalier attitude” demonstrated by the firm in the preparation of material to be presented to the court.
It was clear that AI had been heavily relied upon but not thoroughly checked, and that the non-existent provision was the result of a so-called “AI hallucination“. The subsequent attempts to explain away this error were untruthful, and he contemplated whether further disciplinary action against the solicitors involved was required.
Contempt of court
The judge considered whether there were grounds for contempt of court proceedings under Civil Procedure Rule (CPR) 81.6(1) and using the test set out in R (Ayinde) v London Borough of Haringey [2025] EWHC 1383 (Admin). This is a two-stage process, firstly, an assessment of whether contempt may have been committed, and secondly, an evaluative judgment of whether contempt proceedings should be initiated.
In this case, it was accepted that the senior solicitors had not attempted to mislead the court, rather failed to adequately monitor and check the work of the junior solicitor within the team. The Firm self-reported the matter to the Solicitors Regulation Authority (the SRA), confirming that they would be fully co-operating with any investigations stemming from that.
Outcome
Despite being hugely critical of the Firm’s conduct, particularly that of the junior lawyer, the court was satisfied that that the Firm’s self-referral to the SRA was the appropriate response.
The SRA will be investigating whether there have been any breaches of the Code of Conduct. The Firm has since apologised, taken steps to put safeguards on the use of AI internally and met the costs of its former clients, including the costs of them finding new lawyers to handle the original matter.
It is almost always the cover-up rather than the event that causes trouble.” Howard Baker
Going forward
The judge said that this case should serve as a “public admonishment” of the Firm after they effectively “entirely outsourced the thinking process” to AI.
This case is a stark warning of how over reliance on AI can be an extremely expensive and embarrassing mistake for all involved. The final responsibility for materials produced cannot be left to AI and there is no excuse for “failure to check the accuracy of the material that was placed before the court”. A legal professional must take the ultimate responsibility of doing their work properly and with due care and attention, even from the most junior level. Professionals cannot evade the need for “proper research and thought”.
It is worth noting that the junior lawyer here did not disclose to their superiors the extent to which they had used AI in the production of their work. If they had done, this might have prompted the senior team members to check the content more thoroughly. Law firms should consider whether their AI policies include rules around disclosing the use of AI to ensure that it is used transparently and monitored appropriately.
The key lesson from this case is that AI has “the potential to be wholly unreliable” and can be “plainly wrong or, at the very least, extremely misleading”, as demonstrated here, and that for now it remains a “tool to be used with caution” in professional life.
Link: Malcolm Cork & Anor v Smith [2026] EWHC 1199 (Ch) (22 May 2026)
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