The class action against the Immigration Department is scheduled to commence in the Victorian Supreme Court tomorrow but it is predicted to settle, rather than proceed to a six-month trial.
The ABC understands the men are likely to receive a sizeable payout from the Federal Government if settlement is reached.
The class action is being run by law firm Slater and Gordon on behalf of 1,905 men who were detained on Manus Island between November 2012 and December 2014.
One of the men, Sudanese refugee Abdul Aziz Muhammad, has lived on the island for four years and was there during the outbreak of violence that resulted in the death of fellow detainee Reza Barati, in February 2014.
"It was a really difficult moment for us there and especially for whoever knew Reza Barati and whoever went through that tragedy I think there is nothing on this planet can make you forget what you saw on that night," he said.
"Living on Manus Island I can say it's just like living in hell," he said from Port Moresby in Papua New Guinea where he is receiving medical treatment.
It is not the first time major cases against the Immigration Department have settled without making it to court.
Twenty legal service providers contacted by Lateline reported bringing a combined total of more than 80 compensation cases against the Immigration Department since January 2015.
The majority of those cases settled before going to court, with plaintiffs awarded significant payouts. Most carry strict confidentiality agreements.
Jennifer Kanis, head of social justice at Maurice Blackburn, said the law firm recently settled a case on behalf of a young girl who was held on Christmas Island.
"Every time we get close to having a matter go to court and having those cases ventilated, the Commonwealth settles the claim," she said.
"I can only assume they don't want the public scrutiny about the harm that is being caused by detention or the scrutiny about what needs to be done to redress the harm."
FOI documents reveal $23.4m in compensation
Greg Barns, a Hobart-based lawyer, has been advising another class action for 731 men on Manus Island.
He is certain the case will also settle and he estimated the men could receive about $150,000 each.
"The class action in Papua New Guinea involves really a question of false imprisonment," he said.
"What this means … [is] that for every day they have been kept unlawfully they are entitled to compensation."
Documents obtained under a Freedom of Information request lodged by the Australian Lawyer's Alliance stated that between 1999 and 2011, the Immigration Department paid $23.4 million in compensation to people who had been held in Australian-run immigration detention centres.
"Our suspicion is that that number will be a lot higher now because there has been quite a lot of litigation in the last five years," Mr Barns said.
"There's no doubt that there are at any one time around Australia a large number of claims made against the Immigration Department."
Lateline has contacted the Immigration Department for comment.
Watch the story on Lateline at 9.30pm on ABC News or 10.30pm on ABC TV.