# ADGM Court (Heath J.): AED 282,508 indemnity costs against MIO Legal Consultants for AI-fabricated authorities in a defence pleading

> In a costs judgment dated 18 December 2025, the Abu Dhabi Global Market Court of First Instance ordered MIO Legal Consultants LLP to pay AED 282,508 on the indemnity basis after its defence relied on unverified AI legal research citing cases that did not exist. The court found the firm's failure to verify the AI research reckless and a breach of the ADGM Courts Rules of Conduct 2016.

- Verification status: verified
- Case type: deployment
- Provider: Abu Dhabi Global Market (ADGM) Court of First Instance — Justice Paul Heath KC
- Client: Arabyads Holding Limited v. Gulrez Alam Marghoob Alam (MIO Legal Consultants LLP sanctioned), Legal / courts (adjudicated AI-hallucination sanction) (named)
- Sector: legal / AE / cross
- Verified on: 2026-08-24
- Canonical URL: https://theinternetninja.com/stories/arabyads-v-alam-adgm-cfi-heath-282508-aed-mio-legal-ai-fabricated-authorities-indemnity-costs-2025/
- Source: The Internet Ninja (theinternetninja.com), independent verified-proof platform

## Outcomes

| Metric | Before | After |
| --- | --- | --- |
| MIO Legal Consultants LLP ordered to pay AED 282,508 costs on the indemnity basis (Wasted Costs Application) |  |  |
| Court found the firm's failure to verify AI legal research reckless and a breach of the Rules of Conduct 2016 |  |  |
| Defence cited authorities that did not exist, incl. 'Allied Dunbar [1985]' and 'Johnston v Moreton [2014] EWHC 1219 (Ch)' |  |  |

## Verification method

Tier-1 primary is the ADGM CFI costs judgment (Justice Paul Heath KC, 18 Dec 2025, neutral citation [2025] ADGMCFI 0032), served live and byte-identical from the official assets.adgm.com store; corroborated by independent commentary (Morgan Lewis, Clyde & Co) and legal press (24law.in).

## FAQ

**Why did the ADGM Court sanction MIO Legal Consultants?**

In a costs judgment dated 18 December 2025, the Abu Dhabi Global Market Court of First Instance ordered MIO Legal Consultants LLP to pay AED 282,508 on the indemnity basis after its defence relied on unverified AI legal research that cited cases which did not exist. Justice Paul Heath KC found the failure to verify reckless and a breach of the ADGM Court Rules of Conduct.

**Which fabricated cases were cited in Arabyads v Alam?**

The court identified two authorities, at paragraphs 236 and 313(b) of the defence, that do not exist: 'Allied Dunbar [1985]' and 'Johnston v Moreton [2014] EWHC 1219 (Ch)'. The judgment found the defects had all the hallmarks of hallucinatory results from using AI as a research tool; the specific AI product was not named.

## Full case file

## The problem
A commercial dispute between Arabyads Holding Limited (claimant) and its former employee
Gulrez Alam Marghoob Alam (defendant) over an employee share-option arrangement came before
the Abu Dhabi Global Market (ADGM) Court of First Instance, Commercial and Civil Division. The
defendant's lawyers, MIO Legal Consultants LLP, filed a Defence that the court described as
extraordinarily lengthy: "The narrative alone ran to some 327 paragraphs (47 pages) compared
with the 58 paragraphs contained in the Claim; with exhibits added the total length was 233
pages" [source](https://assets.adgm.com/download/assets/ADGMCFI-2025-165+-+Costs+Judgment+-+Justice+Paul+Heath+KC+-+18122025+SEALED.pdf/68b3146edcba11f0a1f22292341fda95). Opposing counsel found that a number of the authorities cited in the Defence did
not exist, carried incorrect citations, or did not stand for the propositions advanced [source](https://assets.adgm.com/download/assets/ADGMCFI-2025-165+-+Costs+Judgment+-+Justice+Paul+Heath+KC+-+18122025+SEALED.pdf/68b3146edcba11f0a1f22292341fda95).

## What was built
The Defence was prepared using generative-AI legal research. The court found that "AI (in one
form or another) was used by MIO to undertake legal research for the purposes of preparing the
Defence," and that the defects "have all the hallmarks of the hallucinatory results that can
occur when AI is used as a research tool" [source](https://assets.adgm.com/download/assets/ADGMCFI-2025-165+-+Costs+Judgment+-+Justice+Paul+Heath+KC+-+18122025+SEALED.pdf/68b3146edcba11f0a1f22292341fda95). The specific AI product is **not named** in the
judgment. Among the fabricated citations, the court identified two cases that "do not exist":
"Two cases were cited (at paragraphs 236 and 313(b) of the Defence respectively) which do not
exist. These were 'Allied Dunbar [1985]' and 'Johnston v Moreton [2014] EWHC 1219 (Ch)'" [source](https://assets.adgm.com/download/assets/ADGMCFI-2025-165+-+Costs+Judgment+-+Justice+Paul+Heath+KC+-+18122025+SEALED.pdf/68b3146edcba11f0a1f22292341fda95).
Indian legal-news outlet 24law reported the same episode as a firm sanctioned "after finding
that the firm filed pleadings containing fabricated, mis-cited and misapplied legal
authorities" [source](https://24law.in/story/abu-dhabi-court-slaps-63-lakh-costs-on-law-firm-over-unverified-ai-generated-citations).

## The outcome
**The AI-linked sanction: <span class="kpi">AED 282,508</span> against the firm, on the indemnity basis.**
On the Wasted Costs Application, Justice Paul Heath KC ordered: "In relation to the Claimant's
Wasted Costs Application, MIO Legal Consultants LLP shall pay the Claimant its costs in the sum
of AED 282,508 which have been summarily assessed on the indemnity basis" [source](https://assets.adgm.com/download/assets/ADGMCFI-2025-165+-+Costs+Judgment+-+Justice+Paul+Heath+KC+-+18122025+SEALED.pdf/68b3146edcba11f0a1f22292341fda95). That figure and
the indemnity basis are independently confirmed by two global-firm case analyses: Morgan Lewis
reports the firm "were ordered to pay AED 282,508 to the Claimant in respect of the costs" [source](https://www.morganlewis.com/blogs/shiftingsandsoflaborlaw/2026/02/adgm-courts-judgment-serves-as-a-warning-regarding-proper-use-of-ai),
and Clyde & Co that "the Firm was ordered to pay costs on an indemnity basis in the sum of AED
282,508 to the Claimant" [source](https://www.clydeco.com/en/insights/2026/01/the-use-of-ai-in-employment-litigation). The court held that "MIO's failure to verify whatever legal
research was undertaken through AI, was, I find, reckless, and amounted to a breach of the
Rules of Conduct" [source](https://assets.adgm.com/download/assets/ADGMCFI-2025-165+-+Costs+Judgment+-+Justice+Paul+Heath+KC+-+18122025+SEALED.pdf/68b3146edcba11f0a1f22292341fda95) — a finding both firms echo: Morgan Lewis records that the conduct
"amounted to a breach of ADGM Court Rules of Conduct 2016" [source](https://www.morganlewis.com/blogs/shiftingsandsoflaborlaw/2026/02/adgm-courts-judgment-serves-as-a-warning-regarding-proper-use-of-ai), and Clyde & Co that it
"amounted to a breach of the Conduct Rules" [source](https://www.clydeco.com/en/insights/2026/01/the-use-of-ai-in-employment-litigation). The order was directed at the firm, not the
individual lawyers. (A separate <span class="kpi">AED 245,000</span>, on the standard basis, was ordered against the
defendant personally on unrelated costs applications — not part of the AI-linked sanction [source](https://assets.adgm.com/download/assets/ADGMCFI-2025-165+-+Costs+Judgment+-+Justice+Paul+Heath+KC+-+18122025+SEALED.pdf/68b3146edcba11f0a1f22292341fda95).)

## A note on sources
The two criticals — the AED 282,508 indemnity award and the reckless-breach finding — each
rest on the Tier-1 sealed judgment plus two mutually independent Tier-2 firm analyses (Morgan
Lewis and Clyde & Co), so they are not single-sourced. The weakest load-bearing source here is
[4], 24law.in, a regional Indian legal-news aggregator whose value-add is the ₹63-lakh currency
gloss; it corroborates the sanction and the fabrication finding but is not relied on for any
figure the primary judgment does not already state on its face.

## How this was verified
- **Method:** The Tier-1 primary is the ADGM CFI costs judgment (Justice Paul Heath KC, 18
  December 2025, neutral citation [2025] ADGMCFI 0032, case ADGMCFI-2025-165), downloaded live
  and byte-identical from the official `assets.adgm.com` store and stored in `sources/`. Every
  quoted figure and finding was re-grepped verbatim against that judgment text this session;
  the two independent firm analyses and the 24law report were re-checked against local captures.
- **Conflation guards:** the AED 245,000 standard-basis order is against the defendant
  personally, not the AI sanction; AED 785,581 was the total *claimed*; the AI product is
  unnamed in the judgment (the story asserts no ChatGPT/Gemini); the sanction falls on the firm
  (MIO), not the individual lawyers.
- **Date verified:** 2026-08-18.
- **Status:** PENDING — publish-ready; a court-origin adjudicated record with no private client
  to confirm. Open only: a human confirming on the ADGM Courts docket that the 18 December 2025
  costs judgment is final/unappealed and whether the AED 282,508 was paid or enforced. Not
  verified — the green badge is the checker's to grant against the public record.

## Related case files
- [Ayinde v. Haringey (England & Wales High Court): £2,000 wasted costs and a BSB/SRA referral for AI-fabricated citations](/stories/ayinde-v-haringey-uk-high-court-ewhc-1383-2000-wasted-costs-ai-fabricated-citations-bsb-sra-referral-2025/) — the closest common-law cousin: a wasted-costs order for hallucinated authorities in a Commonwealth court.
- [Amar Singh v. Frontier Airlines (10th Cir.): $1,000 and a FRAP 38 / Maryland-bar referral for seven fabricated ChatGPT citations](/stories/amarsingh-v-frontier-airlines-10th-cir-hartz-1000-chatgpt-seven-fabricated-citations-frap-38-maryland-referral-2026/) — a federal appellate mirror of the same fabricated-authorities failure.
- [McCarthy v. DEA (3d Cir.): a precedential first-impression public reprimand for AI-fabricated citations](/stories/mccarthy-v-dea-3d-cir-24-2704-ai-fabricated-citations-public-reprimand-first-impression-2026/) — a court sanctioning counsel for unverified AI research, no monetary fine.

## Sources
1. **ADGM Court of First Instance** · *Arabyads Holding Ltd v. Gulrez Alam Marghoob Alam — Costs Judgment (Justice Paul Heath KC), [2025] ADGMCFI 0032, case ADGMCFI-2025-165* · 18 December 2025 · **Tier 1** (court-origin primary) · https://assets.adgm.com/download/assets/ADGMCFI-2025-165+-+Costs+Judgment+-+Justice+Paul+Heath+KC+-+18122025+SEALED.pdf/68b3146edcba11f0a1f22292341fda95
2. **Morgan Lewis** · *ADGM Court's Judgment Serves as a Warning Regarding Proper Use of AI* · February 2026 · **Tier 2** (independent firm analysis) · https://www.morganlewis.com/blogs/shiftingsandsoflaborlaw/2026/02/adgm-courts-judgment-serves-as-a-warning-regarding-proper-use-of-ai
3. **Clyde & Co** · *The use of AI in employment litigation* · January 2026 · **Tier 2** (independent firm analysis) · https://www.clydeco.com/en/insights/2026/01/the-use-of-ai-in-employment-litigation
4. **24law** · *Abu Dhabi Court Slaps ₹63 Lakh Costs On Law Firm Over Unverified AI-Generated Citations* · 2026 · **Tier 2** (regional legal-news press) · https://24law.in/story/abu-dhabi-court-slaps-63-lakh-costs-on-law-firm-over-unverified-ai-generated-citations