A class action was brought against the state in 2021, after about 1800 adults and 751 children were locked inside nine public housing towers in North Melbourne and Flemington from July 4 to July 18, 2020.

Residents in the towers, who were not given any notice or warning before being locked inside their homes for two weeks, claimed they were falsely imprisoned by the government and were threatened with physical harm if they tried to leave.

Earlier this year, the state government offered to settle with the group for $5 million.

The money will be distributed among those in the class action, and the government's lawyers told the Supreme Court on Monday each adult will receive $2200 and each child $1130.

However, government barrister Georgina Costello KC said the settlement did not mean the state would admit to any fault.

"The towers lockdown was an emergency response that was lawful, necessary and proportionate ... for the purpose of protecting the lives of tower residents," she told the court.

She argued the government's detention of those inside the towers complied with the relevant legislation.

"The deprivation of liberty was reasonable and demonstrably justifiable," Ms Costello said.

She said residents were supported during the lockdown as they were offered welfare, food and medical services, and the rest of the state was also locked down between eight and 32 hours later.

"It's a realistic settlement in light of the confinement in their homes, the welfare support they received and the fact that there were significant restrictions on liberty in Victoria at that time," she said.

Lead plaintiff Idris Hassan said the lockdown had an "indelible psychological impact" on him and compared it to living in Somalia during the civil war.

"During the experience of the lockdown he saw himself as a child in the ravages of a war zone," his barrister Juliet Lucy said.

Mr Hassan's mother Hawa Warsame, who is also a lead plaintiff, said she hoped settling the case would alleviate some of the trauma she has experienced and allow her to move forward.

Both lead plaintiffs are asking for the court to award them a higher amount than the rest of the group, $40,000 each.

This is due to sacrificing valuable time and for expenses, stress and anxiety from taking a central role in the action, Dr Lucy said.

The mother and son have also been ostracised from the Somalian community because they became lead plaintiffs, she said.

Ms Costello asked Justice John Dixon to award the plaintiffs between $10,000 and $20,000 to ensure the money is fairly distributed.

The class action also wants the government to foot their legal bill, which Dr Lucy said was now more than $650,000.

Justice Dixon will decide on the money distribution and has given both parties 14 days to negotiate on legal costs.

A 2020 review by Ombudsman Deborah Glass found an apology was warranted because the lockdown breached residents' human rights due to the lack of notice given and because the timing of the lockdown did not follow health advice.

Australian Associated Press