Background
The underlying proceeding is a complex corporate insolvency case concerning alleged releases and uses of purchaser deposits within the Ralan Group, which conducted more than 30 property developments. The plaintiffs allege that unpaid released deposits exceeded $288 million when the group entered administration. The case involves voidable-transaction and accessorial-liability claims, supported by extensive documentary, lay, and expert evidence.
A final hearing was due to begin on 28 September 2026. Shortly beforehand, the plaintiffs sought to use summaries under s 50 of the Evidence Act 1995 (Cth) to prove about 7,627 underlying documents. They had earlier foreshadowed an exercise involving about 500 contracts, but served more than 7,500 AI-assisted summaries on 11 August 2026 and issued revised versions on 14 August, 3 September, and 21 September.
The defendants identified errors through spot-checking and said they lacked a fair opportunity to verify the summaries against the source documents while also preparing for trial. The Court adjourned the s 50 application part-heard, vacated the September hearing, and relisted it for 1 February 2027. Both sides then sought their costs thrown away by the vacation.
The Court’s Holding
Justice Cheeseman ordered the plaintiffs to pay the defendants’ costs thrown away by the vacation, to be agreed or assessed. The relevant question was why the hearing could not proceed and whose conduct caused that outcome; ordinarily, the party whose conduct necessitated the vacation should bear the wasted costs.
The plaintiffs had failed promptly to disclose that the proposed evidentiary exercise had grown from about 500 to more than 7,500 documents before consent timetable orders were made on 11 August. Because the plaintiffs were best placed to know the exercise’s true scale, their failure to correct the earlier estimate was inconsistent with their continuing obligation under s 37M of the Federal Court of Australia Act 1976 (Cth) to conduct litigation efficiently and fairly.
The Court rejected the defendants’ contention that the plaintiffs’ use of generative AI independently justified adverse costs. AI-assisted extraction and organisation of voluminous material was not improper where accompanied by human verification, supervision, and traceability to source documents. The decisive problem was the late disclosure of the exercise’s scale and its impact on the defendants’ ability to prepare fairly.
Key Takeaways
- A party must promptly disclose a material expansion in a proposed evidentiary exercise so that case-management timetables can be reconsidered on an informed basis.
- Where late disclosure makes a hearing vacation necessary, the responsible party may be ordered to pay the other side’s costs thrown away.
- Responsible, verified use of generative AI to process large document sets is not itself a separate ground for an adverse costs order.
Why It Matters
The decision treats AI as a potentially useful litigation tool, not a shortcut that attracts punishment merely because it is used. But efficiency gains do not displace procedural fairness: parties must give opponents adequate time and access to test AI-assisted summaries against primary documents.
For insolvency and other document-heavy litigation, the case underscores that disclosure of scale, verification methods, and source-material access are central to maintaining workable trial timetables.