It was a disgraceful failure of the Northern Territory legal system that a paedophile escaped being tried for sexually abusing a five-year-old girl, a solicitor has told the child sex abuse inquiry.

Mark Thomas, representing the Rev Trevor Leggott, who heads Australian Indigenous Ministries (AIM), said that what happened to children at the Retta Dixon home in Darwin in the 1960s and 70s was “short of killing them, the worst possible example of abuse of a child”.

The royal commission into institutional responses to child sexual abuse sat in Sydney on Monday, taking submissions following a September hearing into the Retta Dixon home.

One of the main alleged perpetrators of abuse at the home, run by AIM, was house parent Donald Henderson, who worked there for 11 years.

In 1975 another AIM worker reported to police that Henderson had sexually assaulted six children.

Thomas said that at a 1976 committal hearing the focus was on a single charge of abuse of a five-year-old girl.

He described the treatment of the child as “disgraceful” – she was given no support during a public hearing and broke down during her evidence.

The case did go to the supreme court but it, and the other charges, “disappeared into thin air”. Thomas said there was no paperwork to show why this happened. If Henderson had been prosecuted in 1976, other victims would have been encouraged to come forward.

AIM acted appropriately at the time and there was never a cover-up as alleged during the September commission hearings, Thomas said, adding the 1976 failure meant AIM had become “a whipping boy” in the case.

The commission was told in September that in 1985 Henderson was given a good behaviour bond and fined $300 for an unrelated offence against children.

In 2002 more complainants from Retta Dixon came forward and alleged 80 incidents of abuse by Henderson, but the NT director of public prosecutions did not prosecute.

Thomas said the 1976 episode needed further investigation. He repeated an unconditional apology by AIM to the victims of abuse at Retta Dixon.

Henderson “heaped shame on AIM” and on those who worked for years doing their best to help the children, he said. He said AIM did not walk away from the prosecution of Henderson in 1976 and the organisation’s response at the time was appropriate.

He said Leggott had met Henderson, who was now elderly, since September. Henderson had not admitted any wrongdoing but had agreed to a further meeting.

The commission has heard that AIM could not provide financial redress without fatally damaging its current operations.