Donald and Sylvia Collard, from the wheatbelt town of Kondinin, and their seven children were seeking redress from the WA government after the youngsters were removed without consent by state officials and placed in state care between March 1958 and December 1961.
The action was considered by the Aboriginal Legal Service of WA to be a test case for thousands of other indigenous West Australians.
But on Friday, WA Supreme Court Justice Janine Pritchard dismissed the case.
The reasons for the decision are expected to be published soon.
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