Concerns over an increased level of legal costs were raised with former Dual Australia claims manager Josie Gonzalez in 2012, a County Court trial in Melbourne was told today.

Prosecutor Andrew Grant said those working at Dual and others involved in underwriting had started noticing a significant increase in legal expenses and Gonzalez had been “asked to explain” what was happening.

Gonzalez went on maternity leave in May 2013 and at that time a finance department staff member made some inquiries about invoices for services provided by Jaag Lawyers.

Subsequently she conducted an Australian Securities and Investments Commission search on the firm.

“She was shocked to find that one of the directors of Jaag Lawyers Pty Ltd was Josie Gonzalez,” Mr Grant told the jury.

Gonzalez and her husband Alvaro Gonzalez have each pleaded not guilty to 14 charges of obtaining a financial advantage by deception. The trial before Judge Paul Lacava restarted with a new jury this morning.

The prosecution alleges that Dual was defrauded of $17.4 million as a result of more than 400 false invoices for legal services in a period extending a little over two years from March 2011.

Dual Australia, which started operations in 2004 under CEO Damien Coates, outsourced its claims management to Proclaim in its early years.

Josie Gonzalez was employed by Proclaim and worked closely with Mr Coates at that time. Mr Grant said she had a good reputation and was recruited by Dual in November 2010 to set up the firm’s own claims function.

“Mrs Gonzalez put in place the very systems that the prosecution alleges she took advantage of,” he said.

The prosecution says that before joining Dual, Gonzalez proposed that the company could also employ her husband, or use a law firm he was establishing, to handle much of its legal work.

Mr Grant told the jury Mr Coates had rejected the suggestion, saying it would raise conflicts of interest.

Barristers for both defendants dispute the assertion that no work was done by Jaag. They say there was an agreement in place for Jaag to provide legal services.

Peter Kilduff, appearing for Alvaro Gonzalez, says his client believes all invoices were for legitimate services.

“Mr Gonzalez did not send and is not aware of any false invoices,” he said.

Alan Hands, for Josie Gonzalez, also disputes the concerns about rising legal expenses.

“The spike in the legal spend was in direct proportion to the amount of claims they were processing,” he said.

The trial is continuing.