The federal government will announce within weeks whether it intends to pay compensation to prisoners and parolees who were abused while in military service.
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The decision will affect the bid by Hoddle Street killer Julian Knight for compensation for abuse he says he suffered while a cadet in 1987 at the Royal Military College, Duntroon.
Knight appeared in person at the Federal Court in Melbourne on Wednesday, flanked by two prison guards.
Wearing prison greens and runners, his head shaved, Knight apologised to Justice Mordy Bromberg for his "dishevelled appearance", saying he had been kept in solitary confinement for seven months at Barwon Prison in Geelong, and had then spent an hour and a half in shackles in the back of a prison van on the way to court.
Knight, who represented himself in court, is challenging a decision by the Defence Department Abuse Tribunal not to award him payments for alleged ill treatment when he was at Duntroon.
Knight began his military cadetship in January 1987, and seven months later launched the vicious killing spree in Hoddle Street, Clifton Hill, that left seven people dead and another 19 people injured. He was sentenced to life with a minimum of 27 years after he pleaded guilty to seven counts of murder and 46 counts of attempted murder.
He has since claimed his killing spree would never have happened if he hadn't been abused at Duntroon.
The Defence Department Abuse Tribunal denied Knight reparations for his alleged treatment at Duntroon on the basis that people who are in prison or on parole are not eligible for payments, a decision that Knight is now appealing.
In 2004, Knight was declared a "vexatious litigant", which prohibited him from launching legal action for 10 years without first being granted permission by a Supreme Court judge, who had to be satisfied that the case had merit and was not likely to fail.
He has launched dozens of legal claims from his prison cells, costing taxpayers hundreds of thousands of dollars.
On Wednesday, Emily Nans, representing the Commonwealth, told Justice Bromberg that given the complexities of the issues the case raised, including Constitutional issues, the Commonwealth proposed to reconsider its policy of not paying compensation to prisoners and parolees.
Ms Nans said the government was prepared to hear from Knight before that decision was made over the next few weeks, and he would be able to challenge the decision afterwards.
The case will return to court on April 7.
