Carl Williams was beaten to death by fellow inmate Matthew Johnson inside a maximum security unit in the state's most secure prison in April 2010. It took guards 27 minutes to realise Williams had been attacked despite blanket coverage of the unit by CCTV cameras and Williams' status as a key informant in a police corruption case linked to the 2004 execution-style murders of witness Terence Hodson and his wife, Christine. In 2012, the Victorian Ombudsman handed down a damning report on the circumstances of the murder, which found prison authorities had failed in their duty of care to Carl and detailed systemic problems inside Barwon Prison that may have contributed to his death. Soon after the Williams family launched a lawsuit against the state government alleging negligence and seeking damages for economic loss and psychological trauma, including suffering from a condition known as "abnormal grief reaction". In its defence, the state government has argued that the Williams family experienced no "significant injury" as a result of his death. But the family's case received a boost earlier this year when Roberta, Dhakota and Carl's father George obtained medical certificates demonstrating they were suffering from a psychological impairment level above the legal minimum threshold of 10 per cent.

The state government responded by demanding their conditions be assessed by an independent medical panel and subpoenaing the Williams' medical records. Those documents included supportive assessments from experts at the prestigious Melbourne Clinic, a forensic psychologist and a child psychologist from Dhakota's school. The Sunday Age believes Roberta and Dhakota have since been diagnosed with a significant psychological injury by the medical panel. Their level of "impairment" is believed to be at least 50 per cent. The decision of the medical panel makes Roberta and Dhakota eligible for a compensation payment of up to $371,000 each, according to the Wrongs Act. The status of George Williams' medical panel assessment is not known. Ms Williams declined to comment because the matter was before the courts. Mr Williams could not be reached for comment. Their solicitor, Spicer Lawyers, also declined to comment.

In a victim-impact statement submitted after Matthew Johnson's murder conviction in 2011, Dhakota told the judge that her father's death – when she was nine years old – was the worst thing to happen to her and caused severe bouts grief and anger. "Sometimes it feels like a big chunk of my heart has been taken away," she wrote. Roberta Williams is believed to be traumatised in part by the fact that they learned about Carl's death through the media and that the family had been publicly demonised. Nowicki Carbone managing partner Tony Carbone said Roberta and Dhakota Williams could expect significant compensation after the Victorian Ombudsman found in 2012 that Corrections Victoria had breached a duty of care to Carl Williams. "Not withstanding that Williams was a notorious underworld figure, he was still entitled to the protection of the law. Because of an apparent failure, his family has suffered as a consequence," Mr Carbone said. He said the maximum damages available to each litigant under the Wrongs Act was $370,000, with the ultimate settlement based on the extent of pain and suffering. He said it was unlikely they would receive any payment for loss of dependency, because Carl was in prison and had probably not lodged a legitimate tax return during his criminal reign.

Mr Carbone said they could also seek damages for breach of contract, if they could prove that Victoria Police had broken a deal with Carl Williams to provide evidence against former detective Paul Dale, who was charged and later acquitted of the murder of Terence and Christine Hodson. A payout could embarrass the Napthine government, which has spruiked its law and order credentials in the lead-up to the November election. "The state of Victoria is continuing to vigorously defend against the claim," a Napthine government spokesperson said. Attorney-General Robert Clark has previously threatened to apply for a court injunction barring Ms Williams from potentially profiting from her notoriety as an underworld figure, which have included mooted plans to host "underworld tours", opening a cafe and candle shop, and making a documentary about her life. Loading

The Sunday Age revealed last week that Ms Williams, a convicted drug trafficker, was being sought by a production company interested in making an Australian version of hit US reality television series Mob Wives. cvedelago@theage.com.au