All 44 of Melbourne's high-rise public housing are set to be redeveloped by 2051, with five in Flemington, North Melbourne and Carlton expected to be replaced by 2031.
The project was a key pillar of the state government's housing statement unveiled by then-premier Daniel Andrews in September, and would lead to the relocation of more than 10,000 residents.
Resident Barry Berih brought the class action earlier this year, arguing Victoria's cabinet went against legislation when it decided to demolish the towers.
Demolition of all Melbourne's public housing towers is a pillar of state government policy. (James Ross/AAP PHOTOS)
But the Supreme Court on Friday dismissed the case, after finding it had no reasonable prospects of success.
Justice Melinda Richards granted the residents permission to reframe their case.
She suggested Homes Victoria should be at the centre of the case, given it had the power to act on the decision to demolish the towers.
"There is something of a missing middle (in the case)," she told the court.
"Yes of course, cabinet made the decision but it is being clearly implemented."
The judge's decision came after the government applied to have the case dismissed.
The government's barrister Liam Brown SC said it would seek costs from the residents for the dismissal application, given it was successful.
Justice Richards did not give detailed reasons for dismissing the case, saying she would publish them at a later date and hold off on determining costs.
The future of the case will be decided on May 31, when it comes back before the court.Â
Of the 484 residents captured in the class action, 427 have already signed relocation agreements.
Outside court, Mr Berih's solicitor Louisa Bassini said lawyers were pleased with Friday's outcome given the case would stay on foot.
"We're seeking to have residents who live in these towers provided with an opportunity to hear the reasons for the decision to demolish the towers and we haven't yet been provided that," Ms Bassini told reporters.
"So for us now, it will be a case of reframing our arguments somewhat."
The residents want the decision to demolish the towers to be reviewed.
Ms Bassini said they were still hopeful there would be an early resolution to the case.
"It's certainly a decision that many, many people are paying attention to and whose lives are depending on," she said.
Mr Berih, a tower resident of more than 26 years, said residents would keep fighting.
"This is our main important thing for the community," he said.
Justice Richards will publish her written reasons on May 10.
11°C