The Federal Government has apologised to the captain of HMAS Melbourne for being made the scapegoat for one of Australia's most devastating naval disasters.

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In June 1969, 74 American navy personnel died when the USS Frank E Evans collided with the Australian aircraft carrier during exercises off the coast of the Philippines.

Although blameless, the commander of HMAS Melbourne, John Stevenson, was made the scapegoat for the accident.

Mr Stevenson, 91, has just received a letter from the Defence Minister finally acknowledging he was "not treated fairly" by the government of the day and the Australian Navy.

The aircraft carrier HMAS Melbourne was one of 40 ships from six nations taking part in Exercise Sea Spirit in the South China Sea.

In the early hours of June 3, 1969, the USS Frank E Evans was ordered to change position, but her crew made a catastrophic error and ran straight under the bow of HMAS Melbourne.

Damage to the HMAS Melbourne after it collided with the USS Frank E Evans in June 1969. ( 7.30 )

"It was a... very dramatic explosion and then the ship heaved up and... we slowed up quite dramatically, a very ugly sight," Mr Stevenson said.

Even before that night, Mr Stevenson's navy career had been dramatic.

In World War II he was the gunnery officer on HMAS Nestor when it was bombed and hit by torpedoes south of Crete.

He was also present at the Japanese surrender in Tokyo Bay and survived a belly landing of a military plane at Nagasaki airport.

To this day he maintains the poise of a man in full command of his circumstances.

But command is precisely what he lost in the immediate wake of the collision with the USS Frank E Evans.

Court martials

Despite being seen as blameless in the collision, Mr Stevenson was brought up on two court martial charges.

"And it never bothered me that I was responsible or that people thought it because the great team of sailors that were heading the ship gave me full support, and still are doing it by the way," he said.

What dominates Mr Stevenson's memories of that period is the tenacity of his wife, Joanne.

She defied strict orders from Navy and Government to stay away from the American-led inquiry that was beginning at Subic Bay, the US naval base in the Philippines.

"She went to the counsel who again said, 'no you can't go up, it's a restricted area', so she went out of the airport and stood around there and saw a naval aircraft standing there and some naval people going out and she presumed correctly they'd be heading to Subic, and so she walked with them and they didn't know that she wasn't authorised," Mr Stevenson said.

"And so she got up to Subic that way and joined me there."

Mr Stevenson was represented by Gordon Samuels, who went on to become the governor of New South Wales.

Later Mr Samuels would say he had never seen a prosecution case so bereft of any possible proof of guilt.

Despite his honourable acquittal at court martial, Mr Stevenson was demoted from commodore to captain. The Navy offered him a junior desk job.

The Canberra Times editorialised that his treatment was itself a "naval disaster".

"And that was a major downgrade," he said.

"I just didn't like the way I'd been treated and I didn't have any faith in the people that hated me.

"I think (the Navy) were worried that if the Americans were found to be totally at fault that they wouldn't ever want to work with the Australian Navy again.

"I think the Australian Navy felt that under pressure from the Americans that some fault had to be attributed to us to make it much better from their point of view."

The HMAS Melbourne arriving into Sydney in 1980. ( Department of Defence )

'A distinguished naval officer'

Although the taint of scandal and blame had lifted, Mr Stevenson was upset at the Navy and retired.

He went on to enjoy a successful career in the private sector, while his wife Joanne turned her courtroom notes into a book that exposed officialdom's mistreatment of her husband.

As the shadows lengthened, Mr Stevenson quietly abandoned hope that his story had any more chapters left to be written.

But then, after some quiet lobbying by his children, a letter from Defence Minister Stephen Smith arrived out of the blue.

In a few short paragraphs, the minister acknowledges the retired officer was "not treated fairly" by the Australian government of the day and not treated fairly by the Navy because he was charged and tried by court martial.

Mr Stevenson says he harbours just one regret: his wife died this year, five months before the arrival of the letter.

"Yeah, yeah it hurts a bit," he said.

"She would have done pretty much the same as I've said. She would have been very happy."

In his letter to Mr Stevenson's son Bryan, the Defence Minister said:

"Your father was a distinguished naval officer who served his country with honour in peace and war. "Should your father have continued his naval career, the Chief of Navy advises me that he would undoubtedly have been competitive for flag rank."

That is the naval jargon for becoming an admiral.