Hume City Council has warned residents to avoid waterways near the Coolaroo recycling plant after several dead fish were found.

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Melbourne water officials have removed about 100 dead carp from Jack Roper Reserve in Broadmeadows, which is about 15 minutes' drive from the sorting facility that continues to smoulder, seven days after a major fire.

Stockpiles of paper and plastics have been burning at the Coolaroo facility since last Thursday morning, sending thick smoke across Melbourne's north and west for days.

The Environmental Protection Authority (EPA) said low levels of oxygen in the water caused the fishes' deaths.

High levels of E. coli, a major cause of kidney illness, has also been found near the waterways of the parks.

The council has put up signage advising members of the public and their pets to avoid waterways and have asked the public to avoiding fishing and any other recreational activity at the lake or creek until further notice.

The EPA is currently at the scene trying to save the remaining fish but it is expected that more will die in the coming days.

Class action writ not issued

A class action featuring the signatures of more than 70 residents will officially be launch against the plant's owners tomorrow for what their lawyers described as a "catastrophic event that could have and should have been avoided".

Merlynston Creek in Melbourne's northern suburbs, where the EPA says fish are dying. ( Flickr: Takver )

Several hundred residents were asked to evacuate their homes after the fire, while many others reported experiencing respiratory issues because of the thick smoke that engulfed nearby suburbs.

It is believed some residents had raised concerns about the plant because of previous fires that had caused smoke to flow into the surrounding streets.

On Wednesday, SKM released a statement to the ABC saying that there were "broader industry issues at play" and that they had been inundated with waste they could not deal with.

"If our infrastructure is damaged, there is no backup but the huge volumes of residential recyclables keep on coming," an SKM spokesperson said.

"It's illegal to just dump it as waste [at other facilities] so temporary storage is the only answer, that's why we find ourselves where we are today.

"We welcome the Government's taskforce taking a good look at the current system and working with the industry to arrive at a better solution."

Smoke billowed across the city after a similar fire at the facility in February this year. ( ABC News: Gloria Kalache )

Last year an independent inquiry into the EPA signed by then environment minister Lisa Neville, noted that a levy paid by ratepayers for the management of waste was largely ineffective and more of the money needed to be redirected into handling the state's growing amount of waste.

CEO of the Australian Council of Recycling Grant Musgrove had earlier said Victoria's regulation of stockpiled landfill, like the Coolaroo plant, was lagging behind other states.

"It's absolutely disgraceful. In other neighbouring jurisdictions you simply aren't allowed to have stockpiles of that size, I think the [State] Government has certainly been caught napping," he said.

"The Government also has vast resources at its disposal to prevent such incidents, specifically half a billion dollars in the sustainability fund derived from landfill levy revenue, which isn't being deployed for its legislated purpose, which is resource recovery."