"The Corps' lassitude and failure to fulfill its duties resulted in a catastrophic loss of human life and property in unprecedented proportions," Judge Stanwood Duval wrote in a 189-page ruling issued late Wednesday.

"Furthermore, the Corps not only knew, but admitted by 1988, that the MRGO (Mississippi Gulf-River Outlet) threatened human life... and yet it did not act in time to prevent the catastrophic disaster that ensued with the onslaught of Hurricane Katrina."

Duval also concluded that statutory liability shields did not protect the Corps from responsibility for sections of the levee system which were maintained as "navigational channels."

The 720,000 dollars awarded to three homeowners and a business will set the stage for as many as 100,000 more lawsuits which could end up costing the government billions of dollars, the New Orleans Times Picayune reported.

The government is expected to appeal the ruling.

Hurricane Katrina made landfall near New Orleans on August 29, 2005 as a Category Three hurricane and smashed through the poorly-built levees surrounding the city.

Rising floodwaters and hurricane winds ravaged whole neighborhoods, destroying tens of thousands of homes and killing nearly 1,500 people.

"The Corps' negligence resulted in the wasting of millions of dollars in flood protection measures and billions of dollars in Congressional outlays to help this region recover from such a catastrophe," Duval wrote.

"Certainly, Congress would never have meant to protect this kind of nonfeasance on the part of the very agency that is tasked with the protection of life and property."

The landmark ruling was hailed by the mayor of New Orleans as a means of achieving justice for those who have spent years trying to get adequate compensation for everything they lost to Katrina's fury.

"Hopefully this ruling will open up the flood gates, if you will, for those people to receive proper compensation," Nagin said, adding that the city also intends to file a lawsuit seeking damages from the Corps.

Lawyers representing the plaintiffs hailed the decision as an important step on the road to recovery.

"It has been proven in a court of law that the drowning of New Orleans was not a natural disaster, but a preventable man-made travesty," the MRGO Litigation Group said in a statement.

"The government has always had a moral obligation to rebuild New Orleans. This decision makes that obligation a matter of legal responsibility."

Representatives from the Justice Department and Army Corps of Engineers were not immediately available for comment.

However a Corps spokesman told the Times Picayune that the ruling will be appealed.

"Until such time as the litigation is completed, including the appellate process up to and through the US Supreme Court, no activity is expected to be taken on any of these claims," Ken Holder said.