The decision, believed to be an Australian first, was handed down by Victoria's Supreme Court on Wednesday.

The diocese and its current bishop, Paul Bird, were sued by a man who said he was sexually assaulted by Father Bryan Coffey at his parents' home in Port Fairy in 1971.

He was five years old.

Coffey received a three-year suspended sentence in 1999 after being convicted of charges including indecent assaults of males and females under 16 and false imprisonment.

The man, known as DP in court documents, didn't tell anyone except for his partner about the assault until 2018.

He made a claim for more than $1.5 million for loss of earnings as a result of the assaults, a figure described by Justice Jack Forrest as "bold".

The judge instead made an order for DP to receive $200,000 in damages for pain, suffering and loss of enjoyment of life as well as $10,000 for medical expenses and $20,000 in other damages.

He found the diocese was vicariously liable for the actions of Coffey because of the close relationship between the then-bishop, the diocese and the Catholic community in Port Fairy.

Justice Forrest highlighted the relationship between DP, his strict Catholic family, Coffey and the diocese "which was one of intimacy and imported trust in the authority of Christ's representative, personified by Coffey".

Justice Forrest did not accept that DP suffered any form of post-traumatic stress as a result of Coffey's assaults, but concluded that over the past three years he had become fixated upon them.

Because of that they were in part responsible for the anxiety and depression DP now suffers.

"While I accept that there will be other contributing factors to DP's condition I am reasonably satisfied that a cause of his ongoing symptoms is, and will be, the Coffey assaults," he said.

DP had also argued that the diocese was negligent because it failed to exercise reasonable care in its supervision and control of the conduct of Coffey, but was unsuccessful in that claim.

Justice Forrest said there was no evidence that the diocese had any actual knowledge of Coffey's misconduct or any evidence that would lead to an inference they should have known.

"While the circumstances of this case constitute a breach of trust on the part of Coffey, these events occurred nearly 50 years ago and little or nothing could be achieved by punishment of the diocese and its current bishop," he added.

Australian Associated Press