The Cost Implications of Using Fake AI-Generated Hallucinated Legal Authorities: A Case Study of Ndaryiyumvire v Birmingham City University [2025] 10 WLUK 719 (“Ndaryiyumvire”)

The integration of Artificial Intelligence (AI) into the legal profession has the potential to bring about advancement in some areas and for example legal research, document drafting, and case law analysis. However, while AI can expedite certain processes, it also introduces risks, particularly the potential for "hallucinated" legal authorities, or fabricated legal references that seem legitimate but are, in fact, false or non-existent. The case of Ndaryiyumvire is a useful case study to explore the potentially serious cost implications of relying on AI.

Background: The Case of Ndaryiyumvire v Birmingham City University

In Ndaryiyumvire, the applicant’s law firm used AI-driven tools to assist in gathering and presenting legal authorities.

Unfortunately, some of the legal authorities cited in the case turned out to be fabricated. These "hallucinations" were not actual legal precedents, but AI-generated references which AI tools often use to mimic the patterns of legal sources. The use of these hallucinated cases has the potential to lead to significant legal complications.

On awarding a wasted costs order against the law firm using the hallucinated cases, the court confirmed that legal professionals who use such citations “must face serious consequences”. In this case it was not an excuse to argue that the situation arose due to what were described as “inadequacies in the functioning of the firm” (in the main this was because the citation was the fault of administrative staff with the firm rather than a qualified lawyer). However, the court conceded that references to the hallucinated cases had been speedily withdrawn and not referred to at a hearing. As a result the court held the view that it was not necessary for it to specifically refer the matter to the regulator (albeit as it made a wasted costs order, the firm would be automatically referred in any event) or for there to be contempt proceedings.

Costs Implications of Using Fake AI-Generated Hallucinated Legal Authorities

Clearly there are obvious, unpalatable and entirely avoidable consequences which arise from blind reliance on AI tools in such circumstances. Aside from regulatory action and the potential for a wasted costs order however, there are perhaps some less obvious financial consequences:

1. Regulatory costs. The time lost in having to deal with regulatory fallout as a result of such instances can be huge.

2. Financial and Reputation Costs: Cases such as this tarnish the professional standing of the lawyers involved, which could result in loss of client trust and future business.

3. Client Relationship and Compensation Costs; that damages may be payable to a client as a result of this kind of action is obvious. What is perhaps less obvious is the cost of the time spent dealing with that fallout.

4. Training and oversight costs. Firms may need to invest in more advanced AI systems, as well as implement more stringent quality control measures and staff training with the consequential cost.

M&P Legal understands the considerable benefits which may be achieved through the efficient and judicious use of AI tools where circumstances allow. We’re also aware of the risks however and have taken steps to mitigate that with the use of bespoke AI tools and comprehensive training.

The author of this article, Damian Molyneux, is a director of M&P Legal. He can be contacted via dpm@mplegal.im. This article does not constitute legal advice and specific advice should be sought for individual circumstances.

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