Korey Penny, a Noongar man who alleged he was subjected to police brutality and a racial slur from police officers, has settled a legal case with Victoria Police out of court after previously unseen body-worn camera footage emerged ahead of trial.

The footage strengthened Mr Penny's claims of what occurred during his arrest while he travelled to work in Melbourne's inner-city suburb of Southbank in 2020, according to The Age.

In court documents, Mr Penny, 34, claimed he was tackled off his bicycle and called a "black c***" by officers during his arrest for failing to use a bike light while on his commute at the Metro Tunnel building site at around 5am in September 2020.

Mr Penny's lawyer said his client was "violently assaulted" and "racially vilified".

He was hospitalised with an arm injury as a result of the incident and said he continues to suffer complications three years on.

Mr Penny said he was pinned to the ground before police refused to help him to his feet and then pushed against a wall while his clothes and bag were searched.

He told The Age "I didn't even know what was going on" and after asking "you always do this to Aboriginal people?" and telling officers he was from WA, he was told "'you're not in WA now, you black c***".

He estimated he was surrounded by 12 officers.

When an ambulance later arrived Mr Penny was told he was being fined for not having his bike lights on.

At the time, a Victoria Police spokesperson said Mr Penny would be charged on that reasoning and failing to stop on police request, and that "at this stage we are satisfied with the use of force in relation to this incident".

The spokesperson said police involved were not aware of Mr Penny's ethnicity until it was later confirmed in a verbal exchange with him and that an officer's body-camera was not turned on due to the "dynamic nature of the incident".

Mr Penny's lawyer said the use of "excessive force" was beyond doubt, called for those responsible to be disciplined, and for the Independent Broad-Based Anti-Corruption Commission Victoria to investigate the incident.

The matter was referred to IBAC by the Australian Workers Union, who represented tunnellers on the Metro project.

During a Supreme Court directions hearing on February 23 this year, body-worn camera footage from other officers who witnessed the arrest was referred to Mr Penny's barrister Merys Williams by his lawyers after they obtained the footage, the Age reported on Monday.

Ms Williams said officers are heard saying "(he) just clubbed him and literally ripped him off the bike".

"Recent discovery of body-worn camera footage, which records a conversation contemporaneous with the events subject of the pleadings, and really, in essence, goes to the heart of the liability dispute, which is the nature of the physical contact made with police," Ms Williams told the Supreme Court in February, The Age reports.

An undisclosed settlement was reached between the parties before the case was due to go to trial in March.

In a statement Victoria Police said an officer received workplace guidance due to the body-worn camera not being activated and that Mr Penny was not targeted because he is Indigenous.

Victoria Police said they would not make further comment at this stage.

Mr Penny's solicitor Estelle Petrie called for police to be compelled to use body-worn cameras, and face consequences should they not comply.

Mr Petrie said lack of serious disciplinary action by Police against the officers signals the need for a police ombudsman in the state.