An Ontario court has dismissed an appeal by the federal government that sought to quash a class-action lawsuit which claims a devastating loss of cultural identity was suffered by Ontario children caught in the so-called "60s scoop."

The scoop refers to a period of time between the 1960s and the 1980s when thousands of aboriginal children were taken from their homes and placed with non-native families by child welfare services.

The Divisional Court ruling finds that the case deals with a person's connection to their aboriginal culture "as a whole."

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"It is difficult to see a specific interest that could be of more importance to aboriginal peoples than each person's essential connection to their aboriginal heritage," Justice Ian Nordheimer writes in the decision on the case which was heard by a panel of three judges in Toronto last month.

"The importance of aboriginal rights cannot be disputed."

An Ontario court certified the class action lawsuit in July last year, but the federal government then sought, and was granted, leave to appeal that decision.

The ruling on that appeal, released on Wednesday, explained that the issue of whether a proper cause of action was pleaded was the matter in dispute.

The panel of judges found that aboriginal claims are ones which are "particularly undeveloped and fluid, consequently, greater latitude should be accorded to them."

The period covered by the lawsuit stretches from December, 1965 – when the federal government signed an agreement with Ontario known as the Canada-Ontario Welfare Services Agreement – until December, 1984, when aboriginality was made an important factor in child protection and placement practices through the Child and Family Services Act.

The lawsuit alleges many children suffered emotional, psychological and spiritual harm as a result of a loss of connection to their aboriginal culture.

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The case's representative plaintiff, Marcia Brown Martel, has claimed her loss of cultural identity left her feeling like she didn't belong in aboriginal or mainstream society.

She was taken by child welfare services from her home on an Ontario First Nations reserve as a young child. She was adopted into a non-indigenous family at the age of nine, at which point her aboriginal name was changed.

Martel cut ties with her adoptive family after she turned 18 and eventually returned to the reserve where she had been born. After years of slow and often painful re-integration, she is now the chief of the Beaverhouse First Nation in northern Ontario's Kirkland Lake region.

In a statement released on Wednesday evening, Martel and her lawyer called the ruling an "unprecedented" one which "sets the standards for protecting cultural rights of all peoples."

The plaintiffs in the lawsuit are seeking a declaration that Canada breached its fiduciary obligation and is seeking $85,000 in damages for each class member.

Martel's lawyer has said there are believed to be 16,000 surviving children of the 60s scoop in Ontario.

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None of the claims in the suit have been proven in court.