Josie Gonzalez made a “mistake” when she repeatedly named barristers on invoices for hundreds of thousands of dollars who had never worked for the law firm she and her husband set up.

The former Dual Australia claims manager told the County Court of Victoria today that she and her husband Alvaro planned to seek advice from the barristers but never did.

Alvaro Gonzalez, 50, and his wife Josie, 45, have each pleaded not guilty to 14 counts of fraud amounting to $17.4 million.

Jaag Lawyers was named after Josie and Alvaro Gonzalez. More than 20 invoices from the firm, many of them for amounts in excess of $50,000, named individual barristers who had never had any contact with it.

One of the named barristers, John Larkins, testified in court he had never heard of Jaag Lawyers despite an invoice for more than $70,000 that named him.

In cross-examination today, Josie Gonzalez said Mr Larkins “was a barrister Jaag were intending to brief and never needed to”.

She said she had added his name, and other barristers’ names, on 19 further invoices, in advance of completing the amount to be paid. When she later filled in the amounts she neglected to remove the barristers’ names.

“It was just a record-keeping exercise of who we were going to use,” she said.

None of the more than 400 Jaag Lawyers invoices for work done exclusively by Alvaro – which his wife then sent to Dual’s accounts payable section – listed the number of hours worked, the hourly rate, or his name.

On March 17 2011, Josie issued a “payee direction” exclusively relating to Jaag Lawyers.

“I will need you to enter the payee as counsel and not the law firm’s name,” she instructed accounts payable staff. “This will be important for my reporting purposes.”

This meant that searching for “Jaag” under the payee field in Dual’s FigTree accounting software would not reveal the extent of funds received by Alvaro Gonzalez, prosecutor Andrew Grant said.

Early Jaag invoices, which Josie Gonzalez completed herself, simply listed “To our professional services” as a description of work, and were for less than $10,000.

After those invoices were successfully processed and Jaag Lawyers paid, the frequency and amount of such invoices increased. The description line also included a line saying “Defence cost from counsel” and the names of barristers.

Josie Gonzalez denied a suggestion from Mr Grant that she had instructed accounts payable staff to always refer to Jaag simply as “counsel” to give the impression a barrister had been consulted.

She also insisted the $1000 an hour Jaag charged Dual reflected “market rates”, and disagreed with the prosecution’s suggestion this rate was inflated as other firms were charging Dual less than $400 an hour.

“It’s not unreasonable,” she said. Some of the work done by Alvaro for this hourly rate included writing her work emails for her.

Although she wrote in an email to accounts payable saying “I have checked the invoices and I’m happy for these to be paid,” Josie said her only role before forwarding invoices for payment was to check that “they matched the subject matter”.

She said she would not have passed on invoices to accounts payable had they been for work not completed, or were not suitable to be paid.

But Mr Grant suggested she was “implicitly saying, ‘this is a good invoice, please pay it’.”

When Dual’s underwriter, Arch, began expressing concern over the amount of legal spending at Dual, Josie proposed that more than $7 million of the $11 million in indemnity fees be switched to defence costs.

“Any indemnity investigation costs incurred can now be moved into the defence costs bracket,” she said in an email to Dual Australia MD Leo Abbruzzo. This reduced indemnity costs to $3.8 million.

Mr Grant said it was “stunning” that Alvaro Gonzalez was able to pay $4.4 million in cash for a home in the upmarket Melbourne suburb of Kew just 18 months after Jaag began operating. He suggested this was “outside the norm”.

“What is normal?” she replied.

Alvaro had earned $1000 an hour despite initially needing supervision from Josie – who was also a director of Jaag Lawyers – due to his lack of experience when their firm started, the court was told.

Jaag never employed anyone else.

Mr Grant also put it to Josie Gonzalez that tax paid by Jaag was to ensure nobody “asked questions” that would disclose the alleged fraud. “That’s not correct,” she said.

Josie Gonzalez says she was given verbal agreement to “go for it” by Dual Australia CEO Damien Coates when she proposed using her husband’s law firm if she agreed to join Dual and set up an in-house claims service. She disagreed there was any conflict of interest in her awarding work to a law firm run by her husband.

The first Jaag Lawyers invoice she emailed to accounts payable was just one day after Dual issued a statement to brokers and media noting that most claims were to now be handled in-house. That first invoice was given the number 14570.

Josie denied Mr Grant’s suggestion that this number was chosen to give the impression there had been more than 14,000 prior invoices issued by Jaag.

“That’s incredible to believe,” Mr Grant said.

She agreed with Mr Grant's suggestion that as a lawyer employed in a senior management position she had a “fiduciary duty to act honestly”.

The trial is continuing.