Premier Daniel Andrews' tough on crime policy – locking teenagers in adult jails – has been dealt a savage blow after the Supreme Court ruled the move was unlawful.

It is the third time the courts have ruled against Labor's move to imprison minors in the Grevillea unit of the notorious adult maximum security Barwon Prison.

The Supreme Court says Barwon Prison is no place for children.

Despite Labor's repeated insistence that using the unit for teenagers was lawful, Justice John Dixon said on Thursday that its re-classification as a youth justice and remand centre in December, was "incompatible" with the children's rights to be "treated with humanity and respect for the inherent dignity of the human person" and to have their best interests protected.

Some of the teenagers in the Grevillea unit had been held in lock-down for up to 23 hours in cells designed for adult prisoners, he said.

Barwon Prison's Grevillea unit has been housing young inmates. Ken Irwin

The court's decision has renewed calls for Youth Affairs Minister Jenny Mikakos to be sacked and left some caucus members embarrassed by the government's "botched" handling of youth justice.

One MP said Ms Mikakos was not being sacked "because we've lost so many ministers already."

Ms Mikakos – who has been a member of Amnesty International for 25 years and lists Human Rights as an interest on her website – said she and the government were unrepentant.

"I make no apology for the fact that we took the steps necessary to keep the community safe," Ms Mikakos said.

"I and our government have acted in accordance with legal advice. Obviously I am disappointed."

The court's ruling means Labor must now come up with alternative plans while the new high security youth prison is built west of Werribee – the $228 million jail will not be open until 2020.

In the wake of riots at Parkville Youth Justice Centre, Mr Andrews in November said he and the community were sick of the disgraceful behaviour in youth detention.

"Those inmates will be going to adult prison and I make absolutely no apology," Mr Andrews said at the time.

The government also argued that it had no other option but to imprison the inmates at Barwon because Parkville had been so badly damaged.

The teenagers may seek compensation from the government for detaining them unlawfully.

Fifteen of the 16 Barwon teenagers will now be moved to the Parkville centre, which was thrashed by rioting inmates last year leaving some units uninhabitable. The move began on Thursday.

Works to repair and better fortify Parkville are still weeks away from completion.

Ms Mikakos said the government was looking at all of its options for dealing with the latest setback including legislative changes and an appeal, but she did rule out keeping teenagers in police cells.

Opposition Leader Matthew Guy agreed that the inmates deserved no apology for human rights breaches, saying the decision to put the teenagers into the secure facility was the right one, in the absence of a super maximum security youth prison.

But he slammed the minister and the government for its handling of youth justice and for not building a better facility sooner.

"I am more and more concerned every day about the conduct and the performance of the minister," Mr Guy said.

"We should have never got to this stage ... we should never have had 30 riots in our youth justice system."

While previous legal battles against the unit have taken aim at the government's failure to consider the teenagers' human rights, the latest decision indicates that holding them in Barwon Prison is incompatible with those rights.

This means it's unlikely to be able to re-classify the unit in order to keep them there, as it did in December.

Children at the unit also risked developing mental problems "directly relating to the [prison] environment" including paranoia, depression, anxiety conditions and cognitive problems, Justice Dixon said.

He rejected the government's argument that limiting the children's human rights at the unit was justified "in a free and democratic society based on human dignity, equality and freedom".

"The government made a mistake and it now has an opportunity to do the right thing and get these kids out of Barwon immediately," said one of the children's lawyers, Alina Leikin from the Human Rights Law Centre.

She said the children, some of whom had been at the prison for more than five months, had declined mentally and physically.

"They've missed out on education opportunities ... on family connection, and these things are critical to their rehabilitation and in the long run to community safety."