analysisAI HallucinationsAI Governance
Dayal: the first time an AI misuse referral reshaped a lawyer's right to practise
A solicitor filed four AI-invented authorities; the court's referral led the regulator to bar him as a principal and impose two years' supervision.
In Australia, the Federal Circuit and Family Court referred a Victorian solicitor to his regulator after he tendered four case authorities that did not exist, generated by the AI tool in his practice-management software. What the Victorian Legal Services Board and Commissioner then did — a year later — is why Dayal [2024] FedCFamC2F 1166 matters: it is the first case in the tracker where an AI misuse referral produced a structural change to a lawyer’s right to practise, not a fine.
What happened
The underlying matter was a family-law property enforcement hearing (the substantive dispute is recorded separately as Handa & Mallick [2024] FedCFamC2F 957). Asked at that hearing to provide the authorities he relied on, the solicitor tendered a single-page list of four cases. Neither the judge nor his associates could locate any of them. When the judge asked how the list had been prepared, the solicitor said it had come from LEAP, his legal-practice-management software, and confirmed that “there is an artificial intelligence for LEAP.” None of the four authorities existed, and none had been checked before they reached the court.
He offered an unconditional apology and paid the other side’s costs thrown away by the error. Judge Humphreys accepted the apology as genuine and stressed that the decision was “not punitive,” but referred the conduct anyway as a matter of public interest:
“I consider the Office of the Victorian Legal Services Board and Commissioner are the appropriate body and official to determine if there should be any further investigation or action taken in respect of the solicitor’s conduct in this instance.”
The referral was made on 27 August 2024. In the regulator’s own later account of the conduct:
“Mr Dayal tendered a list and summary of authorities to the court that had been generated through the use of artificial intelligence (AI) and provided inaccurate citations and summaries.”
What the regulator did
On 19 August 2025 the VLSB+C varied the solicitor’s practising certificate. The variation is the substance of the case. He is:
- no longer entitled to practise as a principal lawyer;
- no longer authorised to handle trust money;
- no longer able to operate his own law practice;
- permitted to practise only as an employee solicitor; and
- required to undertake supervised legal practice for two years.
The Board framed the decision as a statement about responsible adoption rather than prohibition:
“demonstrates our commitment to ensuring legal practitioners who choose to use AI in their legal practice do so in a responsible way that is consistent with their obligations.”
Why it matters
Most tracker entries end at a costs order or a referral that is still pending. Dayal completes the arc: a court referral turned into a regulator’s decision that reorganised how the lawyer may work for the next two years. Losing the right to practise as a principal, hold trust money, or run your own firm is a heavier consequence than the monetary sanctions seen in most AI cases, and it fell on the failure to verify, not on the use of the tool.
It also shows the pipeline this record is built to capture. The referral and the disposition are separated by nearly a year; the court did one half, the regulator the other. Australia’s professional bodies had by then issued their own AI guidance, and this is that guidance being enforced — the same VLSB+C that co-signed the national joint statement on AI in legal practice acting on a live case.