Judy Moran saw knife incident: Vic court

Gangland matriarch Judy Moran was moved to a higher security cell because she failed to report a prison knife incident.

Moran was moved against her will from an open-style unit to a prison cell in April, amid prison authority fears she was contributing to unrest at the maximum security Dame Phyllis Frost Centre.

She then launched action in the Supreme Court in a bid to go back to her more comfortable unit.

Her lawyer Rachel Walsh has argued the prison's concerns about Moran, 71, were unfounded and that she was effectively punished without being given a chance to address their allegations against her.

"The allegations are of threat and assault - these are serious allegations and not about not putting a pen in the pen jar," Ms Walsh told the Supreme Court of Victoria on Wednesday.

"She's suffering the consequences without the procedure being followed."

Ms Walsh said prison authorities had a statutory obligation to ensure the safety and welfare of Moran, who uses a wheelchair and has health issues, and that this was not being met.

However, Corrections Victoria lawyer Liam Brown said authorities moved Moran after the knife incident between two inmates because Moran saw it but did not report it.

Ms Walsh says Moran has never had a chance to explain that and should be allowed to do so.

Mr Brown said there were also other concerns about Moran's conduct that led to the decision to move her and the court has been told she made threats against other prisoners.

Mr Brown said the movement of inmates within prisons was an administrative matter and not open to court challenge.

Moran is serving a minimum 21 year sentence for arranging the murder of her brother-in-law Des Moran.

Draped in a pink, knitted shawl, Moran was silent as she watched court proceedings via a videolink from prison.

Judge Michael McDonald reserved his decision to a date to be fixed.