Human rights and legal advocates have welcomed Australia’s compensation payout to Manus Island-detained refugees but the former prime minister Tony Abbott and the current immigration minister, Peter Dutton, have condemned the decision and those who sought compensation.

The $70m plus costs the Australian government and its offshore detention contractors have agreed to pay to 1,905 refugees and asylum seekers held on Manus Island is the largest human rights payout in Australian legal history.

The government agreed to settle, critics say, to avoid the scrutiny of a six-month trial in which dozens of refugees were due to give evidence, along with doctors, security guards and other staff, about conditions inside the secretive detention centres.

However, Dutton said the government’s decision to settle was “prudent” and averted the risk of a lengthy and costly trial and potentially much-larger adjudicated payout.

In question time, the immigration minister condemned the plaintiff’s legal representative, Slater and Gordon, calling it an “ambulance-chasing law firm”.

“There is a little bit of objection from those opposite because there are many of those who worked for Slater and Gordon and others, of course, who received benefits from Slater and Gordon. To this very day Slater and Gordon is a significant Labor party donor.”

Dutton said Labor inaction on managing Australia’s borders had led to the record payout.

The former prime minister Tony Abbott said on radio station 2GB the decision to compensate those held in detention “looks like a windfall for people who unfairly took advantage of our nation’s generosity”.

Abbott said: “I don’t think this is the sort of case that should have even got to court, let alone resulted in this kind of a settlement.”

He also condemned the judges involved in the case, despite the settlement being negotiated between the government’s and plaintiff’s lawyers.

“We’ve got a judiciary that takes the side of the so-called victim rather than the side of common sense.”

Papua New Guinea’s supreme court ruled in April last year the detention centre was “illegal and unconstitutional”. It remains open but is slated for closure at the end of October.

The 166-page statement of claim in the class action detailed systematic physical and sexual assault of detainees, inadequate medical care leading to deaths, high rates of suicide and self-harm, and regular outbreaks of violence, including the three-day riots of February 2014 in which more than 70 asylum seekers were seriously injured and Reza Barati was murdered by guards.

Save the Children, the child welfare agency that previously held contracts on both of Australia’s offshore detention islands, Manus Island and Nauru, said the settlement ended the “fiction that the fate of these unfortunate individuals is not the responsibility of the Australian government”.

“After years of denying it, this settlement is a belated acknowledgement from the Australian government that offshore detention causes physical and psychological harm,” its director of policy and public affairs, Mat Tinkler, said. “We saw this firsthand when we worked on Manus Island and Nauru, where the impacts on children were especially dire.”

David Manne, the executive director of Refugee Legal, said the government’s decision to settle was indication it believed the case against them was strong and its chances of successfully defending the offshore detention regime were slim.

“If the government was so confident of the legality of its treatment of asylum seekers on Manus, you’d expect them to defend the case to the bitter end, not pay out a vast sum so swiftly,” he said.

“This payout points to the government seeking to avoid public airing of a strong body of evidence documenting systematic mistreatment and neglect.”

Amnesty International’s Pacific researcher, Kate Schuetze, said the settlement did not change the immediate situation for the 900 men still confined on Manus. She called for all 2000 refugees and asylum seekers held on offshore detention islands to be brought to Australia.

“This historic settlement is a major crack in the Australian government’s crumbling system of abuse and must be a turning point towards a better solution for refugees – one that is grounded in protection not abuse.”

The Refugee Council of Australia said the Australian government “folded as they know an independent judicial examination of the practice of offshore detention would shine a light on how brutal, damaging and inhumane these practices are”.

“Today should be the final nail in the coffin of Australia’s abusive warehousing of people who came to us seeking safety,” the council’s Tim O’Connor said. “This class action settlement provides an opportunity for our government to put an end to the destruction of so many people’s lives, to the damage it does to Australia’s international reputation and to the blank cheque our government uses to fund offshore detention.”

Australia Director Human Rights Watch Elaine Pearson said: “beyond paying out detainees to avoid a trial exposing abuses they have suffered, now the government needs to end that abuse altogether, and that means shutting down the Manus and Nauru centres, and bringing these people to safety here in Australia”.

Australian Lawyers Alliance spokesman Greg Barns said the entire legal action was avoidable.

“Once again Australian taxpayers are footing the bill for the failure of the Australian government to treat asylum seekers lawfully, with basic dignity and respect,” Barns said.

“Many of these men have been tortured or otherwise ill-treated at home, before fleeing because their lives or the lives of those who they love were threatened.

“To subject them to these horrific conditions was unnecessary, cruel and unlawful.”