Carnival Australia has admitted a Sydney passenger was wrongly accused of sexually assaulting children and possibly himself attacked by one victim's father before he pointed out the mistake.

Sydney father John Sun is taking legal action against Carnival Australia after the alleged incident on an eight-day return cruise from Sydney to New Caledonia in December 2016.

The incident occurred on an eight-day return cruise from Sydney to New Caledonia in December 2016. Credit: Chris Hopkins

His statement of claim lodged with the NSW District Court suggests onboard security was told a man had exposed and then touched himself in front of young female passengers.

In its defence lodged with the court, Carnival says two of three victims identified Mr Sun as the offender after being shown his photo.