It was only years later, long after he had been admitted to practise as a lawyer, that John Ellis decided to exercise his legal right to sue the Catholic Church.

As an altar boy, he'd been abused by a paedophile priest. Now an adult, he sought damages.

But Mr Ellis ultimately failed because the church successfully argued it did not legally exist as its assets were held in a trust, and that was protected from legal action.

And in a galling circumstance of fate, Mr Ellis's name was unwittingly shackled to the method the church had used to avoid the legal action. Since then it's been known as "the Ellis defence".

But last night, more than 16 years after the fact, the Victorian Government passed a law closing the legal loophole.

"It's a red letter day … to have that shackle be broken," Mr Ellis said.

Experts estimate the Ellis defence has saved the Catholic Church millions of dollars. ( ABC Ballarat: Dominic Cansdale )

"By taking away the legal defence that they have, that puts people in a much stronger position and it puts the church on the same footing as any other entity or organisation in society.

"That's all we've been asking for, for all these years."

Mr Ellis is hoping the move will inspire other Australian states and territories to follow suit.

The new law marks a significant shift for survivors of clergy abuse who, until now, have had to rely on the goodwill of the church to nominate a legal entity, like a bishop, who would agree to be sued.

Now, unincorporated organisations like religious groups must nominate a defendant with assets, capable of being sued.

Defence saved church 'millions'

According to Judy Courtin, a lawyer who represents victims of institutional abuse, the passage of the law represents a significant change to how the church will be held accountable.

"This defence which they've hidden behind … I would say has saved the church millions and millions of dollars," Dr Courtin said.

"Victims have never been on an equal footing particularly in terms of the law, and so this now hopefully provides … an access to the courts that's been denied them forever."

Victoria's Attorney-General, Martin Pakula, said it was a "momentous" change.

"We think the combination of this legislation and the legislation that removes the statute of limitations will make it so much easier for child abuse survivors to get appropriate compensation," he said.

"It now means that organisations will have to nominate a proper defendant with assets that is capable of being sued, and if they don't the court will nominate one for them."

The ABC has contacted the Australian Catholic Bishops Conference for comment.