The Federal Court of Canada has rubber-stamped an $887-million settlement of a class-action lawsuit involving thousands of disabled veterans.

The case involved a three-decade-long federal government practice of clawing back the military pensions of injured soldiers by the amount of disability payments they received.

Halifax resident Dennis Manuge, a former army sergeant, was the lead plaintiff in the case, which dragged its way through the courts for nearly five years, including a reference to the Supreme Court of Canada on a technicality.

The lawsuit was filed in 2007 on behalf of Manuge and about 4,500 other veterans, though that number has grown to about 7,500 eligible veterans after more detailed information about the disability pension plan was released.

The deal includes $424.3 million in retroactive payments to veterans dating back to 1976.

More than $82 million has been set aside to cover interest, while the rest of the settlement is an estimate of the amount the veterans will be owed in future.

The law firm that fought the case is in line for $35 million in fees associated with the case.

Settling the case was in the best interest of the soldiers and the public, Defence Minister Peter MacKay said late Thursday.

"I am extremely pleased that the Federal Court of Canada has approved the settlement that was reached between our government and the members of the class action, to resolve the issues regarding the offset of Pension Act disability benefits from the Service Income Security Insurance Plan (SISIP) Long Term Disability benefits. Acting quickly and fairly to resolve this matter was of the utmost importance," MacKay said in a statement.

"Our government continues to reflect and improve upon its programs dedicated to supporting Canada's ill and injured military personnel and veterans, and to provide the care that our personnel and their families deserve."

Manuge was injured in an accident at Canadian Forces Base Petawawa in Ontario just before being deployed to Bosnia in 2001. He left the military two years later after suffering from a lower back injury and bouts of depression.