The High Court has ruled that the Catholic Church can be held legally responsible for priests charged with child abuse.
The landmark case now means it will be easier for alleged sex abuse victims to sue for compensation against the church itself, rather than pursue individual priests.
Mr Justice MacDuff announced his decision in a case which he described as been "an issue of wide general importance in respect of claims against the Catholic Church."
The ruling concerned a 47-year-old woman, who cannot be named for legal purposes and known only as JGE, who alleges she was abused by the late Father Wilfred Baldwin at a children's home in Hampshire between 1970 and 1972.
Father Baldwin, who was 40 at the time of the alleged abuse, died aged 75 in August 2006
Although there had been no formal contract between the church and Father Baldwin, there were "crucial features" that should be recognised.
"He was provided with the premises, the pulpit and the clerical robes. He was directed into the community with that full authority and was given free rein to act as a representative of the Church," the judge said.
"He had been trained and ordained for the purpose. He had immense power handed to him by the defendants. It was they who appointed him to the position of trust which (if the allegations can be proved) he so abused."
If the decision is upheld on appeal, it could open the doors for hundreds of other alleged child abuse victims to bring civil claims. It is the first time that a court has ruled that the relationship between a Catholic and his bishop is similar to an employment relationship.
Lord Faulks QC, for the defendants, said that the Catholic Church "takes sexual abuse extremely seriously and it is entirely concerned to eradicate it."
The Vatican is currently investigating claims of sexual abuse at an abbey in London.
Last month police revealed they were hunting a Catholic cleric over allegations of child abuse dating from when he taught at St Benedict's, west London.
Father Laurence Soper, 80, did not answer bail last week and is now though to be in a monastery in Rome.