The January, 1971 letter by a bishop seeking the defrocking of charismatic "surfer priest" Clarence Anderson, to reduce scandal to the church, "brought tears to my eyes", said the serving NSW priest who cannot be identified.

"I'm one of the victims and I've been left, just left," he said. "I was only a little boy."

Father Anderson "has had increasing trouble in sexual matters, especially homosexuality," then Bishop of Lismore Patrick Farrelly wrote to Brisbane Archdiocese on January 15, 1971, in a letter asking the archdiocese to oversee a defrocking with the Vatican.

"This first came to my notice some six years ago, and in every case young boys are involved," the late Bishop Farrelly wrote.

The defrocking, with no report to police and only a passing reference to Anderson's victims, was despite the bishop knowing Anderson talked of seeking a scholarship with the Queensland Education Department after leaving the priesthood.

"With regard to the matter of scandal, I am convinced that there would be less scandal if he were dispensed (defrocked) than if he were allowed to go on. He is rather well known in some of our parishes, and his manner of life has not tended to edify our people," Bishop Farrelly wrote.

The abuser priest Anderson was repeatedly in the media as a competitive surfer through the 1960s, but behind the scenes his sexual abuse of children made him notorious within the priesthood and in the parishes where he worked. So notorious that in the final months of his priesthood he was complaining to Bishop Farrelly that "many priests and people have me in the gun".

Solicitor Mark Barrow of Ken Cush & Associates, representing the Catholic priest alleging abuse by Anderson in 1963, said Bishop Farrelly's letter is the smoking gun that shows the diocese, the broader Australian Catholic Church and the Vatican knew Anderson had been a potential risk to children from shortly after he was ordained in July, 1963.

But despite the letter and other material, including Vatican defrocking documents ordering Anderson to stay away from places where he had previously served "in order to avoid scandal", the diocese moved in January to stop the serving priest's compensation claim.

It sought a permanent stay because of the 50-year delay and "especially as he is a priest".

By February Supreme Court Justice Peter Garling ordered the diocese and the priest to negotiate, and advised legal representatives he "looks forward to being told the matter is resolved".

The case returns to court on March 27.

In his statement of claim the priest said he was aggressively forced into oral sex by Anderson in 1963 in a Lismore diocese church only a few minutes after mass, where he was a 12-year-old altar boy and still in primary school.

"My parents were devout Catholics. Dad would have given me the biggest hiding of my life if I said a priest did that to me. Who else could I tell? The nuns?" he said.

He wasn't proud of being the first known Australian case of a Catholic priest seeking compensation because of sexual abuse by a priest as a child, but he hoped it would help other child sex survivors and change the way people see priests.

"I feel as though I'm doing something for the Lord and for the church, to try to change the thinking so that people understand not all priests are abuser priests. There are priests who are victims of paedophilia themselves. I know there are," he said.

Documents uncovered during the compensation case process show Bishop Farrelly sent Anderson for psychotherapy in 1965 to see "what is wrong with you", after an unstated incident at Kyogle parish that the bishop said would have left Anderson feeling "shame and a feeling of desolation".

The following month Anderson was transferred to Macksville. By December, 1965 the "surfer priest" sent the first of many letters to the bishop begging to be released from the priesthood.

By 1967 Anderson's parents wrote to the bishop from a church mission in New Guinea begging him to get their son "treatment... and hospitalization for a continued period", after he said he wanted to leave the priesthood.

"As you know it wouldn't be a small town scandal, but so bad for the priesthood and the church, such things are picked up and enlarged upon internationally," his parents wrote in the hope that he would "come to his senses".

By 1968, after Anderson was moved to Maclean parish following complaints, he wrote to Bishop Farrelly about other priests who "impressed on me just how great a worry it is... having me in the parish".

By 1969, after he was moved to Tweed Heads, Anderson complained to the bishop that "many priests and people have me in the gun", before there was more controversy about his prominent media presence as the "surfer priest" who won a state championship.

By January, 1971 Bishop Farrelly initiated laicisation (defrocking) proceedings after a Murwillumbah priest complained that Anderson was "the cause of a good deal of embarrassment to Catholics in the Tweed and to his parents" although "he seems to think he is the one who is badly done by".

The priest seeking compensation said he tried to be generous in looking back at the church's handling of the Anderson case.

"The church of that time was obviously very conservative and wanting in terms of dealing with people generally, and not just priests," he said.

"It was also a church that knew next to nothing about sex and sexuality."

He followed the Royal Commission into Institutional Responses to Child Sexual Abuse from 2013.

"I didn't miss it. It forced the hand of bishops to act in response to what was uncovered. We're a long way from where we should be, but at least the church is on notice, and Pope Francis is sending clear messages to bishops that he wants them to lead."

The Diocese of Lismore declined to comment.

The Archdiocese of Brisbane was contacted for comment.