Federal Court of Australia

Jahani v Qiu, in the matter of Ralan Property Services Pty Ltd (receivers and managers appointed) (in liq) (costs) [2026] FCA 1419

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiffs pay the defendants’ costs thrown away by reason of the vacation of the final hearing which was listed to commence on 28 September 2026, as agreed or, if not agreed, assessed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

CHEESEMAN J:

INTRODUCTION

1    These reasons address costs consequential on the vacation of the final hearing in this proceeding, which had been listed to commence on 28 September 2026 and is now listed to commence on 1 February 2027.

2    The substantive proceeding is a complex corporate insolvency case concerning the alleged release and use of purchaser deposits within the Ralan Group, which undertook more than 30 property developments. The amount of unpaid released deposits is alleged to have exceeded $288 million when the group entered administration. It involves multiple corporate plaintiffs, claims based on voidable transactions and accessorial liability, extensive documentary evidence, and lay and expert evidence concerning valuation, industry practice, and solvency.

3    The vacation arose in the course of the interlocutory hearing on 22 September 2026 of the plaintiffs’ application under s 50 of the Evidence Act 1995 (Cth), concerning the mode of proof of approximately 7,627 underlying documents, summaries of which had been the subject of successive revision by the plaintiffs in the weeks preceding the hearing. The defendants raised procedural fairness as a central concern, submitting that they had not had an adequate opportunity to verify the accuracy of the summaries in the context of the work required by the imminent commencement of the hearing. The plaintiffs’ conduct in serving, and repeatedly revising, a summary of this scale so close to the hearing placed the defendants in the invidious position of either diverting resources at short notice to review and check that material, thereby interrupting their preparation for trial on other issues, or proceeding with that preparation without having done so.

4    Having particular regard to that procedural history, I was satisfied that the hearing could not proceed as listed consistently with affording the defendants a fair opportunity to review the proposed summaries against the underlying documents. The s 50 application was accordingly adjourned part-heard, a revised timetable was fixed for the parties to identify, and if possible narrow, their remaining differences, and the hearing was relisted to commence on 1 February 2027. The parties are, in substance, agreed on the utility of the s 50 mechanism to avoid the tender of thousands of documents; the principal issue between them is whether the defendants have had sufficient time and access to the source documents to be satisfied that the summaries are accurate and whether it would be procedurally unfair to maintain the hearing dates.

5    Orders 6 to 8 of the orders made on 22 September 2026 provided for costs consequential on the vacation to be determined on the papers, following the filing of short written submissions: by any party seeking costs, by 4.00pm on 23 September 2026; and by any party opposing an order sought against it, by 4.00pm on 24 September 2026. The issue of costs was deferred for determination on the papers at the plaintiffs’ request to enable them to review the inter partes correspondence. Each party sought costs against the other and each filed submissions in opposition to the other’s claim in accordance with that timetable.

THE COMPETING SUBMISSIONS

6    The plaintiffs seek an order that the defendants pay their costs thrown away by reason of the vacation of the hearing, as agreed or taxed, submitting that there is no basis for the defendants to have their own costs. In the alternative, they seek an order that their costs thrown away be costs in the cause, or that the parties’ costs be costs in the cause; and, further alternatively, that costs be reserved pending the defendants’ foreshadowed review of the summaries.

7    In support of their primary position, the plaintiffs submit that the vacation resulted substantially from the defendants’ deliberate decision not to engage further with the summaries; that the defendants shifted the stated basis for their opposition, from accuracy, to relevance, to procedural fairness; that the summaries were first provided nearly seven weeks before the vacated hearing date and concerned largely repetitive documentary material; that many of the errors identified by the defendants were minor and did not meaningfully affect the accuracy of the transcription; and that the plaintiffs have incurred costs in preparing for the vacated hearing, a material portion of which they say has been wasted, including the costs of re-conferencing third-party witnesses and an associated Mandarin-English interpreter.

8    The defendants seek an order that the plaintiffs pay their costs thrown away by the vacation.

9    The plaintiffs’ time to file lay evidence in chief was fixed at 6 May 2024, extended to 27 May 2024, and again to 6 September 2024. By or about that date the plaintiffs filed voluminous evidence in chief, including documentary material and schedules occupying much of the 38 volume Court Book, to which the defendants responded; no further extension was sought. Comprehensive pre-trial orders were made on 14 October 2025 in preparation for the hearing listed for 28 September 2026. At the interlocutory hearing on 2 April 2026 of the parties’ competing applications for leave to amend their pleadings, the plaintiffs foreshadowed summaries of some 500 separate contracts. The applications resulted in the joinder of six further corporate plaintiffs and leave to file a Second Further Amended Originating Process and Further Amended Statement of Claim: Jahani v Qiu, in the matter of Ralan Property Services Pty Ltd (receivers and managers appointed) (in liq) (leave to amend pleadings) [2026] FCA 398.

10    On 11 August 2026, the plaintiffs served summaries of more than 7,500 documents, prepared using generative artificial intelligence (AI) (or “super intelligence”) and a process of verification by the plaintiffs’ solicitors; an updated version, with the underlying documents, followed on 14 August 2026. The defendants identified errors by spot-checking that material; the plaintiffs accepted that errors existed but disputed their materiality. The interlocutory application was filed on 28 August 2026, and further updated summaries were served on 3 and 21 September 2026.

11    The defendants submit that service of summaries of this volume only weeks before the hearing was productive of procedural unfairness and necessitated the vacation, and that a costs order against the plaintiffs is consistent with the Court's Use of Generative Artificial Intelligence Practice Note (GPN-AI), which records at [4.4] and [5.1] that presenting inaccurate AI-generated material to the Court is unacceptable and may attract adverse costs consequences. They further submit that the scale of the exercise, forecast at approximately 500 documents at the amendment hearing, was not disclosed as having grown some fifteen-fold until shortly before the vacated hearing; that the timetable orders made on 11 August 2026 were fixed by reference to that undisclosed scale; that the plaintiffs have not sought leave to extend the time fixed for their evidence in chief; that senior counsel for the plaintiffs informed the Court that the plaintiffs would otherwise tender the underlying documents in full, leaving the defendants little practical choice but to seek further time; and that the defendants were, in the intervening weeks, occupied meeting other obligations under the timetable, including review of the Court Book and preparation of evidentiary objections and submissions.

CONSIDERATION

12    The power to award costs is discretionary: s 43(2) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). Where a hearing is vacated otherwise than because the substantive dispute has been resolved, the relevant question is why the hearing could not proceed and whose conduct occasioned that result. Ordinarily, the party whose conduct made the vacation necessary should pay the costs thrown away, unless the interests of justice require another course.

13    I am satisfied that the plaintiffs should pay the defendants’ costs thrown away by the vacation of the hearing.

14    Section 37M of the FCA Act requires the parties to conduct litigation consistently with the just, efficient, timely and cost-effective resolution of the real issues in dispute. That obligation is continuing. If the scale of a proposed evidentiary exercise materially increases, the party undertaking it should disclose that development promptly so that the timetable may be made, or reconsidered, on an informed basis.

15    Between the amendment hearing on 2 April 2026 and service of the summaries on 11 August 2026, the proposed s 50 exercise grew from approximately 500 documents to more than 7,500. That increase was not disclosed to the defendants or the Court before the timetable orders of 11 August 2026 were made by consent. The plaintiffs’ progress email of 30 July 2026 did not reveal it. By the time the summaries were served, the defendants’ obligations in respect of the s 50 exercise had been fixed by reference to a substantially understated scale. On the material before me, the true dimensions of the exercise were not made apparent until the summaries were served.

16    The plaintiffs were undertaking the preparation of the summaries and were best placed to appreciate that the exercise had materially exceeded what had earlier been foreshadowed. Their failure to correct the earlier estimate before seeking timetable orders by consent was inconsistent with their obligation under s 37M. They obtained a timetable framed by reference to a much smaller exercise without giving the defendants or the Court a fair opportunity to reconsider whether that timetable remained appropriate.

17    The plaintiffs relied on the complexity and volume of the material to explain the time required to prepare and correct the summaries. As the substantive hearing approached, the parties were under considerable time pressure. Much of the remaining work required the attention of the limited number of counsel and solicitors with a detailed knowledge of the case. Those same considerations required that the defendants be given a reasonable opportunity to test and verify the summaries against the underlying documents before the hearing. Requiring the defendants to divert their resources at short notice to that task would have disrupted their preparation for the substantive hearing. The plaintiffs cannot fairly obtain the benefit of a timetable calibrated to a modest exercise when the true position of which they were aware involved an exercise many times greater in scale, without giving the defendants and the Court a fair opportunity to reconsider whether that timetable remained appropriate.

18    I do not accept, however, that GPN-AI provides a separate basis for an adverse costs order in this case. The plaintiffs used AI to extract information from the underlying documents but then undertook a substantial process of manual review and correction. The vice identified by the defendants is not the responsible use of AI for a mechanical task involving voluminous material. It is the late disclosure of the scale of the exercise and the resulting effect on the defendants’ ability to prepare. Consistently with the observations of Lee J in Rogers v McDonald’s Australia Ltd (AI-use) [2026] FCA 1264 at [11]-[13], the use of AI for collation and synthesis may further the overarching purpose where adequate verification, human supervision, and traceability to source material are maintained. I do not consider that GPN-AI was intended to discourage the responsible use of such tools to manage genuinely voluminous documentary material, where that use is accompanied by adequate disclosure and verification.

19    Indeed, as I observed at the hearing on 22 September 2026, the efficient use of such tools is not one-sided. If AI can properly be used by the plaintiffs to extract and organise information from a large body of documents, subject to appropriate verification, there is no principled reason why the defendants should not avail themselves of equivalent technology to expedite their own review, including the preliminary categorisation of contracts by type, subject to verification against the source documents. The overarching purpose is better served by both parties making appropriate use of available technology than by treating such tools as a basis either for criticising the party that uses them or excusing delay in the party that does not. That does not, however, diminish the defendants’ entitlement to a fair opportunity to check the summaries, particularly given the scale and timing of their provision. The defendants acknowledged at the hearing that they would attend to that exercise using AI in an appropriate way to expedite the process.

20    For these reasons, the vacation was substantially attributable to the manner in which the plaintiffs conducted the s 50 exercise, and in particular to their failure to disclose its escalating scale as it became apparent to them, and to the consequential effect on the defendants’ opportunity to prepare. The defendants should have their costs thrown away by reason of the vacation, to be agreed or, failing agreement, assessed.

CONCLUSION

21    I will make orders in accordance with these reasons.

Associate:

Dated:    25 September 2026

SCHEDULE OF PARTIES