Google: Paralegal did not understand limitations of AI Overview
A bid for summary judgment over a law firm paying out £1.5m it was holding in escrow has failed because the underlying agreement was “a classic example of muddled drafting”, the High Court has held.
Master McQuail in the Chancery Division also heard that a witness statement on behalf of the firm, Cheshire solicitors IPS Law, was drafted using in part the AI overview section of Google searches, which led to the citation of irrelevant and non-existent cases.
The ruling was handed down earlier this month, before the Solicitors Regulation Authority shut down IPS last week as there was “reason to suspect dishonesty” on the part of founder Chris Farnell.
Mihir Choksi, a Dubai-based businessman, is making his claim pursuant to a bridging loan agreement (BLA) under which he deposited £1.5m in an escrow account with IPS so that IPS client Biodex Trade Solutions could use it as proof of funds to secure an investment.
Mr Choksi says the terms were clear that the funds would stay in the account and not be paid away, but in fact IPS paid out almost all of it at the direction of Biodex, including for IPS’s fees.
IPS has not returned the £1.5m and argues that is a matter between Mr Choksi and Biodex. It says IPS had no independent obligations to him to retain or to return the money.
Mr Choksi sought summary judgment on the basis that IPS had no realistic prospect of defending the claim.
Master McQuail described the BLA as “a classic example of muddled drafting in which ‘legalese’ has been over-deployed… in a way which obscures rather than makes plain the meaning intended by the parties”.
The terms “give rise to a doubt or a conflict” over whether the funds had to be kept in the escrow account or were able to be deployed at the direction of Biodex.
“[The claimant’s] argument that the use of the escrow account set up would be pointless if Biodex could simply direct payment out at a time of its choosing and therefore there must have been a restriction on Biodex’s ability to use the funds has an attraction.
“However, the counter argument is that there would be little obvious commercial purpose in an arrangement intended to facilitate Biodex making a profitable investment if the claimant’s funds were to sit in a solicitor’s client account and Biodex’s only ability to deploy them would be by pointing to their existence.”
The uncertainties meant the construction question should go to trial, she said.
Master McQuail added that, had she found IPS contractually bound to retain the funds, the firm would not have been saved from summary judgment by its case on knowledge, acquiescence, variation or estoppel.
The master was strongly critical of Mr Farnell’s second witness statement. “It is prolix and repetitive and cites numerous authorities – which, as Mr Farnell should know, is not the purpose of a witness statement – several of which have wrong citations or names and do not support the proposition for which they are cited. Some are completely irrelevant, and others do not exist.”
In July, she directed that Mr Farnell and the member of his team responsible for drafting it explain how this came about.
Justice Okafor, a paralegal with IPS who drafted the statement, said some of the authorities were drawn from “an internal research memorandum not prepared by him, but which it was his responsibility to check”, the judge recounted.
He also used the AI overview section from Google searches, “not understanding its limitations”.
Mr Okafor told the judge that IPS Law “has adopted new measures to ensure higher accuracy and quality control of legal references in court documents”.
Mr Farnell apologised to the court and claimant, saying it was an “isolated instance representing unprecedented and unintentional departure from usual rigorous verification standards and that there was no intention to mislead”.
He said he “repeatedly” asked Mr Okafor to verify the case citations.
Master McQuail noted: “The witness statement does not refer to Mr Okafor’s explanation that his research included using the Google AI Overview feature in his research or explain why Mr Farnell, as the deponent of Farnell 2, did not feel it necessary to explain that the source of his legal submissions was the research of another person and not personally verified by him.
“The witness statement also refers in very general terms to ‘corrective measures’ at IPS implemented as of 30 July 2025 including a mandatory three-tier verification system and maintenance of a verification log documenting the source and date of each case law check.
“No documentary evidence of these corrective measures is exhibited.”
The judge did not say whether she was going to take any further action over this.
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