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Bruce Trevorrow, 51, sued the State of South Australia after he was placed with a foster family in 1958.
In August last year the Supreme Court awarded Mr Trevorrow, who now lives in Victoria, $525,000 damages for false imprisonment, pain and suffering.
Today, Justice Thomas Gray, awarded Mr Trevorrow another $250,000 in lieu of interest.
Mr Trevorrow's lawyers had argued he should receive $800,000 in interest, calculated from the time he was removed from his family.
But Justice Gray decided Mr Trevorrow should receive a lump sum of $250,000.
Mr Trevorrow has fought a 10-year legal battle for compensation, launching his case in 1998.
His family were from the Coorong region. On Christmas Day, 1957, aged 13, he was sent by his father to the Adelaide Children's Hospital to be treated for stomach trouble.
He responded well to treatment and in January, 1958, he was removed from the hospital and placed into the care of a foster family, with the authorisation of the Aborigines Protection Board.
Mr Trevorrow never again saw his father, who died eight years later.
He remained in foster care for 10 years, until he was returned to his mother and siblings.
Mr Trevorrow sued the state of South Australia, claiming his removal from his family led to alcoholism, depression and a troubled life.
The court heard he lost his family, community and cultural identity.
Justice Gray found the state had acted without legal authority when it placed Mr Trevorrow with a foster family.
"The Crown solicitors of the time gave advice that the powers to remove Aboriginal children from their parents were limited," he said.
The state had denied it unlawfully removed Mr Trevorrow from his family, arguing that the Protection Board was his legal guardian.
Mr Trevorrow was not in court to hear the decision on interest.