Two partygoers who were dressed like punk icon Sid Vicious and a naughty schoolgirl when they were shot by police in a Melbourne nightclub will receive seven-figure payouts.

Dale Ewins and former girlfriend Zita Sukys had sued the state of Victoria for negligence and excessive force, claiming their lives had been turned upside down by the July 2017 shooting at the Saints and Sinners erotic ball at Inflation nightclub.

Heavily armed police stormed the venue after a patron reported Mr Ewins had a gun in his pants, and the pair were shot while performing a sex act. The gun was a plastic toy.

Mr Ewins was shot twice in the back, tasered three times, beaten and stomped on, while Ms Sukys was shot in the leg.

The trial began on Monday in the Supreme Court but the proceedings were dismissed on Wednesday after an earlier mediation session. No details of the settlement were revealed in court, but the pair will reportedly receive more than $1 million each.

Ms Sukys received an apology that she was an “innocent bystander who was injured through no fault of her own in the circumstances of the case”.

Zita Sukys leaves court on Wednesday. Photo: AAP

Inflation nightclub owner Martha Tsamis also settled with Victoria Police over the shooting. She said she was thrilled with the confidential settlement.

“Sometimes cool heads come together and decide what the success of something can be, and I think maybe cool heads prevailed,” she said.

“As far as I’m concerned we’ve done nothing wrong and we were prepared to fight it all the way.”

Ms Tsamis also recently won a defamation case against Victoria Police over an unrelated incident.

“I’m hoping it’s all going to settle down but I just think if you’re going to talk to Victoria Police you talk to them in the Supreme Court,” she said.

“I’m very happy with the outcome and I just want to get on with my life and run my business.”

Dale Ewins outside court on Wednesday. Photo: AAP

Justice John Dixon said the resolution was “not necessarily an easy thing to do” but had saved the court considerable resources.

“I thank the parties in particular for negotiations on their positions and accepting some compromise,” he said.

The court had been told a critical incident response team was sent to Inflation to investigate reports of the gun. A staff member told officers he was confident it was a toy.

Mr Ewins denies having pointed the toy at police during the confrontation, but police are adamant he did.

Footage from the nightclub shows Mr Ewins laughing as he points the fake gun at a bartender as he buys drinks with Ms Sukys.

Not long after, police with ballistic shields, batons, semi-automatic guns, tasers and a shotgun firing non-lethal bullets stormed the club.

Chris Blanden QC, for the state of Victoria, said the initial report characterised Mr Ewins as “looking like a bikie with a tattoo on his forehead”.

Audio from the aftermath of the shooting records Mr Ewins and Ms Sukys screaming in pain and swearing after they were shot.

Outside court, Ms Sukys and Mr Ewins declined to answer questions about the case. Mr Ewins had been due to give evidence on Tuesday, but the settlement means his version of events will stay secret.

Victoria Police did not comment on the outcome of the case or whether any officers were reprimanded after the incident.

-with AAP