The Catholic Church has reached a confidential settlement with two sisters who say they were sexually abused by a priest in the Maitland-Newcastle diocese decades ago.
In their lawsuit, which a judge was due to begin hearing on Monday, they said the church knew about the pedophile activities of Father Denis McAlinden long before they were abused.
McAlinden died in a nursing home without ever being charged.
The sisters sued the estate of the late Maitland-Newcastle bishop Leo Clarke, who was in charge at the time, and the trustees of the Roman Catholic Church for the Diocese of Maitland-Newcastle.
On Monday in the NSW Supreme Court, Justice Peter Garling urged the parties to settle the case so the women would not be unnecessarily subjected to distress.
On Tuesday, he was told the parties had reached a confidential settlement.
The agreement has "obviated the need for the stress and trauma of the plaintiffs having to give evidence in court about their abuse and other sensitive personal matters", said the diocese's lawyer, Lachlan Gyles SC.
"We are hopeful that the settlements will assist these ladies to put these sad events behind them and to move forward in a positive way to seek to repair the damage which was done to them so many years ago."
The judge agreed to his request that the amount of the settlement be recorded in a sealed envelope on the court file and not be opened without the permission of a judge.
The women's statements of claim referred to being abused by McAlinden in the 1970s and 80s.
They said prior to their being abuse, complaints had been made over the years about his abuse of other children, but no action was taken against him.
In its defence statement, the diocese accepted that, if the judge found the sisters were abused, there was information about other children after May 1976 which should have led to McAlinden being immediately stood down as priest of Forster Tuncurry parish .
