Illustration: Jim Pavlidis. "Church leadership is about leading, not being led about by the nose by lawyers. That's really what the royal commission is demonstrating to us," Mr Sullivan said. The Ellis defence is based on a 2007 NSW Court of Appeal decision that found the church cannot be sued for compensation because it does not technically exist as a legal entity. The precedent has angered victims seeking compensation, who are forced to rely on the church's Melbourne Response and Towards Healing redress schemes, which cap ex gratia payments at $75,000 and require recipients to waive their legal rights to sue. In March 2014, Cardinal Pell signalled the church could be distancing itself from the controversial defence, in a statement before the royal commission.

"Whatever position was taken by the lawyers during the litigation or by lawyers or individuals within the archdiocese following the litigation, my own view is that the church in Australia should be able to be sued in cases of this kind," he testified. A month later, a "supervisory group" comprising many of the top religious authorities in Australia - including the archbishops of Melbourne, Sydney and Brisbane - announced it had endorsed a landmark new policy that would effectively put an end to the Ellis defence. It called for new legislation that would require all unincorporated associations (such as churches or religious orders) that work with children to nominate a legal entity that would be a "proper defendant" for the purposes of litigation. "The identity and corporate structure of the body corporate should be left to the institutions to determine in accordance with their internal structures, provided the body corporate has sufficient assets or is appropriately insured or indemnified," according to the policy statement created by the church's Truth, Justice and Healing Council. It was endorsed by the supervisory group in April 2014 and affirmed in a March 2015 submission to the royal commission.

In a bid to verify the policy was being implemented, Fairfax Media requested a formal undertaking from nine dioceses and religious orders that they would no longer employ the Ellis defence in current and future sex abuse lawsuits. None of the organisations were willing to issue a formal statement confirming that position. The archdioceses of Melbourne and Sydney said both would "assist anyone making a claim to identify the proper entity to respond", but did not officially renounce the Ellis defence. Archbishop Mark Coleridge of Brisbane declined to comment. The dioceses of Ballarat and Rockhampton, and the Salesians of Don Bosco, did not respond to the request. Fairfax Media understands that a dispute between church organisations and their insurers has become a major impediment to implementing the policy.

The Christian Brothers and Marist Brothers said they will help victims identify a proper defendant in cases where claims are not covered by insurance. "The Marist Brothers will not generally rely on the so-called Ellis defence for uninsured claims," a spokesman said. But both orders claim they are powerless to prevent its use in abuse cases that are being managed by their primary insurance company, Catholic Church Insurance. CCI, which is wholly owned by the Catholic Church, provides insurance to the vast majority of dioceses and religious orders around the country. "Whilst insurers have separate legal representation which is instructed independently to the Order, the Christian Brothers have and will continue to impress on them the need to be 'victim focused' at all stages of any litigation," a Christian Brothers spokesman said.

But an insurance industry source said church organisations could chose not to invoke their insurance policy and handle the abuse claim and its defence directly. "It is a matter for the entities themselves to make decisions on their legal liability," he said. Fairfax Media also understands that enforcing the decision to drop the Ellis defence has been frustrated by the church's "autonomous and independent" structure. In Australia, individual bishops and religious orders are free to ignore or modify policies endorsed by authorities like the Supervisory Group or Australian Catholics Bishops Conference. Resolving all outstanding and future sexual abuse compensation claims is expected to cost the dioceses and orders - or its insurers - hundreds-of-millions of dollars, sources say.

Francis Sullivan, chief executive of the Truth, Justice and Healing Council, said it was "quite clear" what the church's policy should now be in relation to the "Ellis Defence". "Lawyers for the church have to get with the program. Our advice is that an entity must be made available to be sued which has insurance or sufficient assets to cover the claims." cvedelago@theage.com.au