A ruling that the Catholic Church can be held liable for the wrongdoings of its priests was upheld by the Court of Appeal today.
The decision was announced in an action which has been described as raising ''an issue of wide general importance in respect of claims against the Catholic Church''.
At the High Court in November Mr Justice MacDuff gave a decision in favour of a woman, who cannot be named for legal reasons, who claims she was sexually assaulted as a child by the late Father Wilfred Baldwin, a priest of the Portsmouth Diocese, at a children's home in Hampshire run by an order of nuns.
Giving his decision on a preliminary issue in the damages action by the woman, who is now 48, the judge held that, in law, the Church ''may be vicariously liable'' for Father Baldwin's alleged wrongdoings.
The trustees of the Portsmouth Roman Catholic Diocesan Trust - the defendant ''standing in the shoes of the bishop'' - were given leave to appeal against his decision and that challenge was heard by three judges in London in May.
Today, the appeal was dismissed by a two-to-one majority.
In a statement issued after the ruling, the trustees of Portsmouth Diocese said the appeal was brought to achieve clarity ''as to the nature and extent of the bishop's liability for the actions of diocesan priests''.
It added: ''We had not just the right but the duty to ask the Court of Appeal to hear the different arguments in this case, not least because of the far-reaching implications to faith and other voluntary organisations of extending vicarious liability in this way.''
The statement by the trustees stressed: ''This case is not, and has never been, about seeking to avoid or delay the payment of compensation to victims with valid claims.
''The diocese has for years been offering support to clerical abuse victims, and the law rightly allows victims to sue for damages on grounds of negligence, or, of course, to seek redress from the actual perpetrators of the abuse.
''This case is about fundamental legal principles involving the very nature of civil society and religious freedom.
''It would be disastrous if, in seeking to provide redress for victims of harm, the law put intolerable new pressures on the voluntary sector.
''This judgment shows further thought and scrutiny are required before clarity in this regard can be established.''
A number of judgments in recent years ''have sought to extend the scope of vicarious liability, which is designed for relationships of employment, to very different relationships, including that between a bishop and his priest, who is an office holder and not an employee''.
The statement said: ''The decision, although disappointing, was not unanimous, which emphasises the complexity of this area of the law.
''The two judges who found against us acknowledged the force of our arguments and all three appeal judges commented on the difficulty of reaching a decision.
''The judges also referred to the wide-reaching ramifications of the decision, not just for the Church but for other organisations, both charitable and commercial.
''Because this case raises complex questions of law of real public importance, the trustees will now be seeking advice from leading counsel as to a potential appeal to the Supreme Court.''
The Court of Appeal judges refused permission to appeal to the Supreme Court, but the trustees can make a direct application to the UK's highest court in an attempt to take the case further.