The court decision is the final chapter on what has been a two-year saga for Ed Hill and Joe Henderson, whose actions led to the state government conceding it needed to bolster timber harvesting rules – but who were then charged on summons with illegally entering the logging zone.

The men, who describe themselves as "citizen scientists", say they found evidence the state-owned timber corporation VicForest had illegally logged protected rainforest canopy trees in the Bendoc State Forest in April 2015.

A Department of Environment, Land, Water and Planning report later found that while the logging may not have been illegal, it was a needless destruction in an area that had "significant environmental assets", but little financial value to loggers.

The activists submitted a report to the department describing what they had found in the Errinundra plateau of the forest, including 37 mature rainforest canopy trees on the ground – the largest being a black olive berry measuring 3.7 metres in circumference.

"The presence of so many large rainforest canopy species, many of them likely to have had similar canopy widths to the canopy we measured, indicates that the area was closed canopy Cool Temperate Rainforest," the men wrote in their report to the department.

They also photographed "pools" of water on the ground, which they said showed that a stream had once flowed through the rainforest gully, "now choked with logging debris".

In an internal report compiled by the Timber Harvesting Compliance Unit, released under freedom-of-information laws, the department said formal regulatory action against VicForest was "not recommended" because of the difficulties in proving the area had been cool temperate rainforest before the logging took place.

However, it recommended VicForest review its practices, especially in the felling of large trees that were "un-merchantable".

"Although this was not a technical breach of the regulatory rules, this was unnecessary and ... similar outcomes should be avoided for future timber harvesting outcomes," it said.

"It is not considered best practice for large rainforest canopy trees ... to be needlessly destroyed. The officers assessed that the area of interest included significant environmental assets, but had no merchantable value."

While the pair's report provoked recommendations that logging practices be improved, they were charged on summons with illegally entering a Timber Harvesting Safety Zone.

Last week the Orbost Magistrates Court dismissed charges against the pair, saying it could not be established that VicForest had properly advised the public that the area was an exclusion zone.

The Environmental Justice Australia lawyer who acted for the pair, Danya Jacobs, said the regulation and oversight of logging in Victoria was "a mess".

"It is failing to keep our threatened species safe despite overwhelming community support for native forest protection, and instead public resources are spent prosecuting well-meaning community members who are doing the work that properly should be done by the regulator."

The court ordered the Department of Economic Development, Jobs,Transport and Resources, which pressed charges, to pay the activists' costs.

VicForest declined to comment, and the department did not respond to a request for comment.