The Northbound Processing v SA Diamond Regulator case highlights the risks of citing AI-generated case law in South African courts. It concerns the urgent release of a refining licence linked to a disputed business sale and highlights the consequences of relying on fictitious authorities created by AI tools. The judge referred counsel to the Legal Practice Council for citing these non-existent cases. The court granted interim relief to Northbound and ordered the Regulator to release the licence. It also referred the legal team to the Council. This sets a clear precedent for the responsible use of generative AI in legal proceedings

Who should care about the judgment and why?

  • Legal practitioners and advocates: The court referred Northbound’s legal team to the Legal Practice Council (LPC) for citing fictitious, AI-generated case law. This shows that even accidental use of unreliable sources can lead to serious consequences.
  • In-house counsel and compliance teams: The case confirms that once a licence is issued and communicated, it cannot be withheld without a proper legal process. This is important for managing risk in regulated sectors.
  • Legal educators and trainers: This case provides a clear example of how courts expect lawyers to verify authorities and avoid citing AI-generated case law unless verified.
  • Firms using AI in legal work: AI tools must be checked. This case shows that relying on them without verifying outputs can result in professional misconduct and reputational harm.

What could you do about it?

  • Verify your sources: Always verify case citations using trusted legal databases like SAFLII or LexisNexis.
  • Audit AI outputs: Use AI tools cautiously and review all outputs manually before including them in any legal submissions or your work.
  • Update internal policies: Legal teams should have clear policies in place for AI usage, particularly around court filings.
  • Train your juniors: Ensure candidate legal practitioners and junior counsel understand the dangers of AI hallucinations and the importance of professional diligence.

Our insights on the judgment

This is one of the first South African judgments to deal directly with the misuse of generative AI in legal proceedings. It reflects a growing trend in local and international courts. Judges are warning legal professionals about the risks of relying on unverified AI-generated content. This case reinforces the ethical duty to independently verify all legal sources before citing them. Even unintentional AI “hallucinations” can cause reputational harm and lead to professional misconduct complaints.

It is also a reminder that AI tools are just that – tools. They cannot replace proper legal research or professional oversight. Courts expect high standards, especially in urgent applications where they rely on written submissions. Heads of argument are not secondary; they form part of the record and carry weight.

Beyond the AI issue, the case also provides clarity on how regulators must act once they make and communicate a decision. Unless a decision is formally challenged in court and set aside, it remains valid and must be acted on. This is important for any business that depends on government licences or approvals to operate.

It is not the first time a South African court has dealt with this issue. In Mavundla, the KwaZulu-Natal High Court also referred counsel to the LPC for citing AI-generated case law. Together, these cases send a clear message: lawyers must treat AI-generated content with caution. The responsibility to get the law right remains a human one.

Digest

Facts and background

Northbound Processing brought an urgent application compelling the South African Diamond and Precious Metals Regulator to release a refining licence issued in January 2025. The Regulator withheld the licence due to a shareholder dispute involving Rappa Resources, the previous licence holder. Northbound argued that it had fulfilled all conditions for release, including completing the business transfer and returning Rappa’s licence.

Despite this, the Regulator refused to hand over the licence. Northbound claimed this refusal was irrational and unlawful, especially since the Regulator had already made its decision to issue the licence. The Regulator did not oppose the application but stated it needed a court order to proceed due to the ongoing dispute.

Reasoning

The court held that the Regulator made and communicated its decision. It could not later withhold the licence unless a court formally reviewed and set it aside. The judge found no lawful basis for the delay and ordered the release of the licence. Withholding it would cause serious commercial harm.

While preparing the judgment, the judge discovered that Northbound’s legal team had cited fictitious case law in their heads of argument. These cases were generated by a legal AI tool called “Legal Genius”. Although there was no evidence of intent to mislead, the court referred the matter to the LPC for investigation, reinforcing that legal practitioners must independently verify all sources before relying on AI-generated content.

Order

  • The applicant’s application is heard as one with urgency.
  • The first respondent is directed to immediately release the refining licence to the applicant.
  • The applicant must return the licence if it fails to institute proceedings confirming the business sale within 30 days or is unsuccessful in such proceedings.
  • Costs of the main application were reserved, but costs for the counter-application (which was struck for lack of urgency) are awarded to the applicant.
  • The conduct of the applicant’s legal team regarding AI-generated case citations has been directed to the LPC Gauteng Provincial Office’s attention.

Details of Northbound Processing v SA Diamond Regulator

  • Universal citation: [2025] ZAGPJHC 538
  • Case number: 2025-072038
  • Full name: Northbound Processing (Pty) Ltd v South African Diamond and Precious Metals Regulator and Others (2025-072038) [2025] ZAGPJHC 538 (30 June 2025)