A former headmaster at the prestigious Sydney boys' school, Knox Grammar, has told a royal commission he deliberately withheld information from police conducting an investigation into child sexual abuse.

The Royal Commission into Institutional Responses to Child Sexual Abuse heard Dr Ian Paterson was approached by a policewoman from the Child Protection Enforcement Agency in December 1996.

Inspector Beth Cullen had received anonymous information alleging child sexual abuse by six people who had been employed by the school.

Dr Paterson told the royal commission's counsel assisting David Lloyd he deliberately attempted to mislead Inspector Cullen.

David Lloyd: "You were deliberately attempting to mislead Inspector Cullen about matters that were centrally important to her investigation". Dr Ian Paterson: "I accept that". Lloyd: "And you did so with intention of protecting those teachers about whom she was making the inquiries". Paterson: "That's the way it appears".

Under questioning, Dr Paterson confirmed he did not share what he knew with police.

David Lloyd: "Instead of telling Inspector Cullen about what you knew about the allegations, you instructed your secretary to provide to her files which to your knowledge would not tell her about the allegations which had been made". Ian Paterson: "Correct". Lloyd: "You had in your mind knowledge that was of critical importance to the very matters she was investigating? Do you accept that?" Paterson: "Yes". Lloyd: "You instructed a staff member to provide to her documents which would not reveal the truth about allegations in respect of those men, correct?" Paterson: "Correct". Lloyd: "You accept that you did nothing after she left to tell her what you knew about the allegations?" Paterson: 'I accept that."

Dr Paterson also denied groping a girl during rehearsals for a school musical in 1989.

He told counsel assisting that at the time he did not believe touching a teenager on the bottom was criminal.

But he insisted the evidence given by Lucy Perry, who is now the chief executive of the women's charity Hamlin Fistula Ethiopia, was wrong.

David Lloyd: "You know that Ms Perry says that during one of the dress rehearsals you put your hand on her bottom and slid it right down to cup her buttocks and your hand was near her genitals, you know Ms Perry says that don't you?" Dr Ian Paterson: "I know that she said that, yes". Lloyd: "And it's true isn't it?" Paterson: "Absolutely not".

Dr Paterson rejected the allegation that boys in the musical Guys and Dolls laughed when they witnessed his actions - and were instead responding to Ms Perry's performance.

"They were roaring approval for her performance as a sultry dancer," he said.

Principal 'tried to cover up' allegations against teacher

Dr Paterson also revealed he tried to "cover up" allegations against a teacher who was facing legal action in September 1992.

He told the commission he learned a victim, known as ATJ, had raised allegations of sexual abuse by a teacher, Barrie Stewart, and that he hoped the litigation would "go away".

Stewart was later convicted of indecent and sexual assault involving seven students.

Dr Paterson told Mr Lloyd he decided to keep the information to himself, and not alert the school council.

David Lloyd: "You determined that you would do whatever was in your power to cover up the allegations, correct?" Dr Ian Paterson: "Yes". Lloyd: "And you know that those allegations that were made were against a teacher who you presently employed, correct?" Paterson: "Yes". Lloyd: "And he was teaching very young boys wasn't he?" Paterson: "Correct".

The commission heard that in early September 1992, Stewart was called to the headmaster's office and asked whether he was homosexual - and not about the impending litigation brought by a former student.

"You were more interested in finding out whether Stewart was homosexual than you were in finding out whether Stewart had sexually molested a former student," David Lloyd said.

'That's the way it appears," Dr Paterson replied.

"And that's the way it appears because that is the truth, isn't it?" Mr Lloyd asked.

"In retrospect, yes," Dr Paterson replied.

The commission had been examining Dr Paterson's handling of the issue at the school, where concerns were made about inappropriate conduct by a number of teachers between 1970 and 2012.

Earlier Dr Paterson told the commission he "didn't think" to alert police when a man wearing a balaclava allegedly indecently assaulted a student in his bed in 1988.

The hearings are continuing before Justice Jennifer Coate and Commissioner Bob Atkinson.