The Diocese of Lismore has denied liability for alleged crimes by the late charismatic "surfer priest" Clarence "David" Anderson against the then 12-year-old altar boy in the 1960s, and has given notice it will seek a permanent stay against the priest's case in the NSW Supreme Court.

The move, initiated by the diocese last week, means survivors are "back to square one" in some dioceses despite legal reforms following the Royal Commission into Institutional Responses to Child Sexual Abuse, the priest's lawyer Mark Barrow said.

The permanent stay application is despite the diocese offering compensation to two families in 2004 who alleged Anderson sexually abused two brothers aged 9 and 14 in the Macksville area between 1966 and 1968, and two other brothers, aged 9 and 15, in Tweed Heads parish in 1969.

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Melbourne-based Broken Rites put the two families in touch with each other after both were told they were the first to complain about Anderson, and that the diocese had no knowledge of allegations about him. Anderson was a priest for just seven years. One of his alleged victims was advised by the Diocese of Lismore in 2002 that Anderson resigned in 1970. He died in 1996.

The priest alleging Anderson sexually abuse him is one of 11 people seeking compensation from the diocese because of Anderson's alleged abuse. The case will include the circumstances of his leaving the priesthood and whether the diocese took steps to remove him from ministry because of child sex allegations.

In an article in 1969 Anderson was described as 30 years old, "deeply tanned" and with "an easy way about him".

Anderson won the Queensland senior men's surfing championships in 1969 and was pictured surrounded by young surfers. He became a Diocese of Lismore priest after training as a priest at Sydney's St Patrick's Seminary.

In the article Anderson is quoted saying: "When parents give their sons a board they give them an incurable dreamland - but they always know where their kids are."

The parish priest alleging Anderson sexually abused him, who cannot be identified for legal reasons, alleged the "surfer priest" forced him to perform oral sex in the sacristy of a Lismore diocese church immediately after a mandatory school church service where the boy was an altar server.

The sexual abuse caused "psychiatric injury" and was a result of the diocese and the Sisters of Mercy putting Anderson in "a position of authority, power, trust and intimacy" where the boy was vulnerable, the priest's claim said.

Anderson "relied on, took advantage of and exploited" the relationship, the claim said.

In a statement to the Newcastle Herald the priest said he initiated his claim "So as to move forward with my life as a priest in good standing".

The diocese last week advised the priest it would apply to the NSW Supreme Court for a permanent stay to stop his claim, and gave him a deadline of February 6 to withdraw or it would seek a costs order against him as part of the permanent stay case.

In a letter to Mr Barrow the diocese said the more than 50-year delay in bringing his claim, "especially as he is a priest", had permanently prejudiced its ability to defend it.

In December the diocese succeeded in a permanent stay case in the Supreme Court against a woman in her 80s who alleged she was sexually abused as a young girl by Port Macquarie priest John Curran, who died in 1957.

Justice Robert Beech-Jones permanently stopped the woman from pursuing her claim because the death of key witnesses and lack of documentation would leave the diocese in a "manifestly unfair" position trying to defend the claim.

Justice Beech-Jones said his decision was not a reflection on the woman's credibility or "the credibility of the account of the sexual abuse she stated she suffered".

Mr Barrow accused the Catholic Church of covering up Anderson's crimes against children and "using that delay to avoid justice and paying fair compensation".

A woman whose son made a statement to police in 2000 about being sexually abused by Anderson said he arrived at her home one day and offered to drive her surfing sons to the beach.

"I encouraged my sons to go with Anderson because I thought he would act a substitute father-figure for the boys. My boys loved surfing, and so did Anderson. During these outings Anderson began sexually abusing each of my boys, separately," the woman said.

Shortly after making his police statement her son was advised that Anderson had died four years earlier.

A lawyer for the diocese said there would be no comment while the matter is before a court.