The lord chancellor is seeking £22m from the sole director of a legal aid firm shut down by the Solicitors Regulation Authority in a High Court case expected to last 10 days.

London-headquartered Blavo & Co Solicitors, which had 18 offices across the country and employed 240 full-time staff, was shut down by the regulator in October 2015 and wound up the following month.

Representing the lord chancellor, Rachel Sleeman, head of chambers at London set Five Paper, told Mr Justice Pepperall in the Royal Courts of Justice yesterday that the lord chancellor is seeking £22m pursuant to guarantees and indemnities that Blavo provided under its legal aid contract.

The 'key date', Sleeman told the court, was 10 August 2015, when Legal Aid Agency staff attended the offices of Blavo & Co to inform the firm and John Blavo, director, that an official investigation had commenced into the firm's mental health claims. The investigation was triggered by an earlier request to see 49 files as part of a contract compliance audit.

Sleeman said HM Courts & Tribunals Service had no record of a representative of the firm attending in  23,173 claims. The firm was asked to provide all the files, but Sleeman told the court that the agency has received only 99 since August 2015.

The lord chancellor argues that Blavo's obligation is 'not merely assurity but as a primary obliger too'. The firm's failure to provide all of the requested files was a 'fundamental breach' of contract.

For John Blavo, Robert Bourne of London set Three Stone told the judge that the case is not about fraud or to determine whether there has been any misconduct by the firm.

Bourne said Blavo could not produce the files because 'he has no title to the files. The only person with title to the files, if that can rightly be said to exist, is the client and the firm, not Mr Blavo personally. After the intervention on 14 October 2015, the position changed quite starkly.' Bourne said the SRA intervention made it difficult to produce the files.

He said: 'The only question your lordship has to answer is: do the claimants have a valid claim against [Blavo & Co Solicitors]. If so, how is that claim brought home, if at all, against [John Blavo] in light of [the terms of the guarantee] ... It appears to me that the claimant cannot simply prove his claim against my client by proving his claim against [Blavo & Co Solicitors]. He must prove his claim independently against my client.'

Bourne said the information requested by the agency, upon which the lord chancellor relied, was 'unreasonable within the time limits specified'. He said: 'Seven or eight people attended at 10.30am at those offices together with a team from the SRA, and my clients and staff of [Blavo & Co Solicitors] were subject to a series of interviews.' The firm was effectively asked, by close of business the following day, to take the necessary steps to satisfy the investigators of all the files, which was a 'grotesque request', Bourne said.

He said the agency's request, which subsequently required producing 1,000 files a week, was a 'momentous' task. 'It would effectively mean for a significant firm, a significant City firm, a West End firm, would have to withdraw from all litigation activity and probably a number of other departments, and engage solely in the hunt for files.' Bourne pointed out that the oldest files were the least likely to be in the office and most likely to be in storage or passed to fee-earners who had left the firm.

'One thousand files a week is impossible,' Bourne said, 'and that's the "kick off" in the way in which this was dealt with. Bourne said it would be his submission that 'by 10 August 2015 what was going to happen to this firm had already been decided. And it was [that] this firm was going to fail'.

Bourne said there had been a repudiatory breach of contract by the lord chancellor. The lord chancellor's claim that there had been a 'fundamental breach' of the firm's contract was wrong.

Bourne stressed that Blavo 'does not concede or believe that there was any substantial irregularity in his firm. He was not aware of any substantial irregularity in his firm. So far as he was aware and believes and remains convinced, these files are genuine files of genuine mental health tribunal hearings that took place'.

At the start of the hearing, Mr Justice Pepperall granted an application by the lord chancellor to amend the particulars of his claim, which was £22,732,521.38p when it was originally issued. It has been amended and reduced by approximately £235,000.

The Gazette has challenged a claim that some parts of the hearing might need to be held in private. Sleeman told the court that, as a result of previous reporting restrictions, parts of the current hearing that may need to be heard in private are likely to relate to files containing extracts from client files. Mr Justice Pepperall told the court that it might be possible to anonymise client details rather than exclude the public and the press.

The hearing continues.