The Victorian government has settled a multi-million-dollar class action by businesses shut down during the state’s second wave of coronavirus in 2020.

The compensation claim on behalf of thousands of businesses sought financial damages caused by alleged negligence in relation to Victoria’s hotel quarantine program.

Lawyers handling the class action said the $125 million settlement was agreed to on the eve of the trial, which had been due to begin on March 10.

About 16,000 businesses registered for the class action, but they are yet to be assessed for eligibility. 

The legal action was taken against the State of Victoria, including former health minister Jenny Mikakos and former jobs and trade minister Martin Pakula, as well as key public servants in the Health, Human Services and Jobs departments.

It was alleged that negligence in the program allowed COVID to escape from hotel quarantine, causing Victoria’s second lockdown from July 2, 2020.

Damian Scattini from legal firm Quinn Emanuel Urquhart and Sullivan, which handled the class action, said the settlement brought to an end years of “hard-fought litigation”.

“This is a significant outcome for eligible businesses. July to October 2020 was an extraordinarily difficult period for Victorian retail businesses,” he said.

“The $125 million settlement that we have achieved on their behalf is recognition of this hardship, and I hope it provides some measure of relief for eligible businesses.”

Victorian government frontbencher Gabrielle Williams said the state agreed to the settlement to protect against protracted legal proceedings that would have come at a high cost.

In confirming the agreement, she said the global pandemic was unprecedented and that the Victorian government did the best it could to protect the community with the knowledge it had at the time.

“We saw governments around the world work hard in the face of some incredibly frightening data that spoke about prospective harm to a community that we’d never seen before,” Ms Williams said.

“Governments did all they could around the world to make sure they were protecting their communities from potentially large-scale death, so we need to look at the actions that were taken in that frame.”

The settlement is yet to be approved by the Supreme Court of Victoria.