HALIFAX - A disabled veteran who launched a class-action lawsuit against the federal government said he is thrilled Ottawa will respect a Federal Court ruling and stop clawing back money from veterans' pensions.

Dennis Manuge broke down Tuesday as he thanked his lawyers, federal ministers and thousands of veterans he says will now see repayment of possibly $500 million that had been cut from their monthly payments over a period of nearly 30 years.

"This has been a very difficult experience for Canada's disabled veterans, including me," he said, with his 17-month-old daughter and wife looking on.

"It is a relief that we are one step closer to being reimbursed."

Defence Minister Peter MacKay and Veterans Affairs Minister Steven Blaney announced earlier in the day that they would not appeal the decision handed down this month that found the government was acting illegally by reducing veteran's long-term disability benefits.

The ruling was a powerful victory for roughly 6,000 veterans, some of whom have seen their payments slashed by thousands of dollars a month.

"This is huge," said Alisa Sellar, whose now bed-ridden husband developed multiple sclerosis after working for years as a fuel air frame technician and saw his benefits cut by more than $60,000.

"It's been a huge struggle for the last 11 years to try to keep our home and look after my two children and their father. ... This is going to make my life a lot easier."

The class action was filed in March 2007 on behalf of Manuge and 4,500 other disabled veterans whose long-term disability benefits were reduced by the amount of the monthly Veterans Affairs disability pension they receive.

Peter Driscoll, Manuge's lawyer, said a veterans' ombudsman estimated a settlement could exceed $500 million if the payments go back to 1985. But, he added that the clawback provision has been in place since 1979, which could significantly increase that amount.

Driscoll said they would soon sit down with federal officials to sort out those details.

"We believe the spirit that Minister MacKay talked about today reflects reimbursing disabled veterans for the money that's been clawed back under this policy," he said.

"So if that policy goes back to 1979, that is the decision of the court."

MacKay said the cost still had to be worked out and wouldn't reveal how many people it might affect or how far back it would go, but added that the departments were moving quickly to settle the matter.

Asked why it took a court case to address complaints from veterans across the country who said they were losing vital income after becoming ill and disabled while serving in the military, MacKay said the government needed legal clarification on the benefits.

"We now have that clarity and it has received considerable legal and judicial oversight," he said.

"As a result of that court action, we are now moving forward out of fairness and respect for those veterans to ensure those benefits are fully paid."

The opposition praised the decision, but said it shouldn't have taken a prolonged legal fight, parliamentary motions and multiple ombudsmen's reports condemning the clawback to make it.

"I am very pleased for Dennis Manuge and for his tireless efforts to obtain justice for himself and for thousands of veterans in Canada," said Liberal veterans affairs critic Sean Casey.

"It is sad that the government had to be shamed into doing the right thing, but regardless of their motives, the decision to respect the Federal Court is a welcome development."

Blaney said all three disability benefits awarded to veterans will be aligned and not be deducted from the new Earnings Loss Benefit under the New Veterans Charter.

Manuge joined the army in 1994 and spent almost 10 years in uniform, serving a tour in Bosnia in 2001 after he was injured.

In 2002, while still serving, he began receiving a $444 monthly disability pension on top of his pay, but that changed when he was discharged for medical reasons in December 2003.

The military's compulsory insurance plan entitled Manuge to 75 per cent of his former income for two years because he had become too physically disabled to do his job.

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  • OAS vs CPP

    Here is a look at OAS and the CPP and how they differ. (Getty) <em>With files from CBC</em>

  • What is OAS?

    The Old Age Security pension is a monthly payment available to Canadians aged 65 and older who apply and meet certain requirements. Unlike CPP, it is not dependent on a person's employment history and a person does not need to be retired from a job to qualify. The government adjusts the OAS payment every three months to account for increases in the cost of living according to the Consumer Price Index. The average monthly amount was $508.35 in the last quarter of 2011. The maximum payout for the first quarter of 2012 is $540.12. There are also supplementary programs, including the Guaranteed Income Supplement, which provide additional income to low-income seniors. The government claws back OAS payments from high-income Canadians. In 2011, for example, if you were retired but had an income of more than $67,668 (from things like pensions and personal investments), the government would reclaim part of your OAS payment - 15 cents for every dollar of income that you had above the $67,668 threshold. That means that if you were retired with an annual income of around $110,000 or more in 2011, your OAS payout would be reduced to zero. (alamy)

  • Who Is Eligible?

    OAS is available to Canadian citizens and legal residents living in the country who have spent at least 10 years in Canada after they turned 18. It is also open to people outside of the country who were Canadian citizens or legal residents on the day they left the country, as long as they spent at least 20 years of their adult life in Canada. (Getty)

  • When Should You Apply?

    A person should apply for OAS six months before they turn 65. If you have not lived in Canada continuously or were not born in Canada, the government requires a statement containing all the dates when you entered and left the country. It may also ask for supporting documentation. If a person applies after age 65, they can receive up to 11 months in retroactive payments along with a payout for the month in which a person applies to receive OAS. So if a person applied after their 66th birthday, they would receive 12 months of OAS payments. (<a href="http://www.flickr.com/photos/elwillo/" target="_hplink">Flickr:Keith Williamson</a>)

  • How Is The Rate Calculated?

    In order to qualify for a full pension, a person must have lived in Canada for at least 40 years after turning 18. People also qualify if they reached the age of 25 on or before July 1, 1977, and either lived in Canada, had some residency in the country after age 18, or held a valid Canadian immigration visa and spent the 10 years immediately before appying in Canada. For those who do not qualify for a full pension, a partial amount is paid out based on the number of years spent living in Canada. For instance, if a person has spent 36 years of their adult life in the country, they will earn 36/40th of the full OAS amount. Based on the eligibilty requirements, the minimum payout is one-quarter of the total, to account for a total of 10 years spent in Canada. Once a partial pension has been approved, the percentage of the total OAS pension received will never increase even if a person spends more years in Canada. (Matt Cardy/Getty Images)

  • What Is CPP?

    The Canada Pension Plan is a form of retirement income that is open to all Canadians who have worked and paid into the system through deductions from their paycheques. The amount a person receives under the system depends on how much and for how long a person contributed, along with the age at which a person started receiving CPP payments. There are three types of CPP benefits: disability benefits, retirement pension and survivor benefits. For the purposes of clarity, this article focuses on retirement pension form of CPP. The average monthly CPP benefit in 2011 was $512.64. The maximum payment in 2012 is $987.67. The government adjusts the CPP rate every January to account for changes in cost of living as measured by the Consumer Price Index. According to Service Canada, "If you have lived and worked in Canada most years between age 18 and 65 and earned about the average Canadian wage ($39,100 in 2002), at age 65 you would receive a CPP retirement pension of about $788 a month." (Getty)

  • Who Is Eligible?

    Anyone who has made a payment to CPP is eligible for full retirement pension benefits once they reach the age of 65. A person can begin receiving CPP anytime after age 60 if they stop working or reduce their income, although they incur a financial penalty by doing so. In 2012, a person receiving CPP early will be subject to a 0.52 per cent reduction for each month before the age of 65 that they received payments. That number is slated to rise to 0.6 per cent each month in 2016. On the other hand, if a person chooses to delay CPP payments they receive a similar increase for each month they wait between the age of 65 and 70. In 2012, that increase works out to 0.64 per cent per month and will rise to 0.7 per cent next year. (alamy)

  • When Should You Apply?

    This is really up to the individual and whether they want to receive a smaller or larger CPP benefit. However, the government recommends applying six months before a person wants their pension to begin. Canadians can apply online or print out an application and deliver it to a Service Canada location. Similar to OAS, a person can receive retroactive payments covering up to 12 months if they delay applying for CPP until after their 71st birthday. (alamy)

  • How Much Do I Contribute To CPP?

    A person contributes 4.95 per cent of of their total pensionable income -- set at a maximum of $50,100 in 2012 -- to a total of $2,306.70 in contributions per year. Their employer contributes an equivalent amount. Self-employed people, on the other hand, must contribute both portions. Anyone earning less than $3,500 is automatically exempt from CPP contributions. At age 70, a person stops contributing to CPP even if they continue working. (alamy)