The children were transferred to the Barwon maximum security prison after a riot caused extensive damage to the the Parkville Youth Justice Centre in November 2016.
Supreme Court Justice John Dixon on Thursday found the state government's decision to create the youth justice wing in the adult prison incompatible with the children’s rights and unlawful.
“The developmental needs of the detainees, specifically their physical, social, emotional, intellectual and spiritual needs, were significantly limited when Grevillea was re-gazetted as youth justice centre and youth remand centre to which children were transferred,” he told the court.
He said detainees were at risk of developing mental health problems directly related to conditions in the adult prison.
Watch: Lawyer Alina Leikin on Barwon ruling
The court heard the detainees were often held in lockdown for up to 23 hours and some were handcuffed during limited periods of release.
Hugh de Kretser, from the Human Rights Law Centre, said the Victorian Government now had the opportunity to "right" their mistake and move the 15 remaining children to an age-appropriate youth justice facility.
Lawyer Alina Leikin said some inmates had been confined to Grevillea for five months and should be moved as soon as possible.
Jesuit Social Services said the Victorian Government’s actions may have already jeopardised the children’s chances of rehabilitation.
The decision sparked a feisty exchange in Victorian Parliament with the opposition calling for the resignation of Children and Families Minister Jenny Mikakos.
The government says it's disappointed with the ruling and always acted with the children's and the community’s safety in mind. It is considering whether to appeal the ruling.
Ms Mikakos has said she would make no apology and did what was necessary.
Victims of crime advocate Noel McNamara said he's disgusted by the ruling.
“Human rights and all that sort of business has just gotta be put out of the way with these people, they terrorise people,” he said.
The Victorian government established the Grevillea Unit at Barwon prison after about 40 inmates rampaged through the Parkville youth facility in November last year.
The legality of the transfer has been challenged in court four times, most recently by the Human Rights Law Centre.
Justice Dixon's ruling means the children could receive compensation if they choose to sue the government for unlawful detention.
Additional reporting by Luke Waters
