The barrister representing the director of Blavo & Co against the Lord Chancellor, who is seeking to recover £22m in legal aid payments, unexpectedly received a box of some of the firm's client files at his chambers, the High Court has been told.

The fifth day of the hearing opened with Robert Bourne, representing John Blavo, telling Mr Justice Pepperall that he was not sure whether the files, which were sent from another law firm, overlapped with the list of files the Legal Aid Agency demanded to see after it began an official investigation into Blavo & Co's mental health claims. The firm was notified of the agency's official investigation on 10 August 2015 and shut down by the Solicitors Regulation Authority two months later.

Rachel Sleeman, representing the lord chancellor, told the court that 'we have no idea if the client has waived privilege for anyone to look at them'. After being told about the files, the court heard that Sleeman's instructing solicitor had spoken to the SRA's intervention agents. Pepperall gave counsel a few minutes to do searches based on the information that was visible on the outside of the files. When he returned, Sleeman said the files, 'on the face of it', were not ones which appeared on the LAA's list.

Giving evidence yesterday was Amana Humayan, former head of assurance at the Legal Aid Agency. Humayan told the court that she had 'extensive' conversations with her team 'about the level and nature of work they had to do to substantiate their concerns' about Blavo & Co.

Humayan said there was another bulk of work ongoing in relation to a contract compliance audit of Blavo & Co concerning 49 files. Of those 49 files, 42 were not matched by HM Courts & Tribunals records. Additional work on those 42 files included contacting NHS providers and NHS trusts 'to corroborate whether those patients existed' or if they had records of the tribunal hearings. Humayan said: 'For the vast majority of the 42, the NHS trusts confirmed to us that the patients did not exist. In one particular case the building referred to where a tribunal was heard burnt down some years ago.'

When the agency informed the firm that it had begun an official investigation, Humayan said she expected the firm to be able to address some of the agency's concerns.

Questioned about the number of files the agency demanded to see, and the deadlines given to the firm, Humayan said that the agency was told by the firm that the 'storage and archive arrangements were such that the files could be retrieved two to three working days. We were assured of that on the day of the official investigation. Had concerns been raised by the senior partner or any other Blavo representative on that day, we would have reconsidered our request. It was confirmed by a number of fee-earners on the day of the official investigation that two or three days was a fair amount of time they expected the files to be available if they were not held on site.'

When asked by Bourne if she was aware that there had been a burglary at the firm on 29 August 2015 and that a number of staff were leaving, Humayan said she was.

The hearing is now reaching it final stages, as Bourne began closing submissions yesterday afternoon. He told the court that for the purposes of establishing liability against his client, John Blavo, under the terms of guarantees provided under the legal aid contract, it was not possible for the lord chancellor to rely on nil assessments of files: '[The lord chancellor] has to prove his case by reference to actual fact rather than by reference to nil assessment.'

Bourne said: 'The starting point for your lordship in this... the divergence of £22m over three years is inherently implausible, shocking. It's a bizarre allegation that requires strong proof if it is to be validated. It's also a scattergun allegation, a compendious allegation, that treats as invalid every single claim made in every single amount in respect of every single one of those 23,000 [files requested by the LAA].'

The hearing continues.