Helen Allison was the supervising solicitor for the Crown Solicitors Office as it defended a claim by the women from the Bethcar chilren's home, a state-funded institution at Brewarrina in the state's north-west.

The Royal Commission into Institutional Responses to Child Sexual Abuse has heard that, under Ms Allison's supervision, state government solicitor Evangelos Manollaras fought the victims at every turn, refusing to accept that a number had ever been abused, and hatching a plan to put them under surveillance.

The commission, sitting in Sydney, heard on Friday that, in June 2011, three years after the victims commenced the lawsuit, Ms Allison gave formal legal advice to DOCS, the defendant in the case, not to undertake any form of mediation with the victims.

This was even though the women had repeatedly indicated that they were willing to settle the matter, that the legal costs on both sides were already "enormous", that a man had been convicted on child-sex charges, and that there was a likelihood the state would eventually lose.

"Certainly in hindsight, we should have gone to mediation," Ms Allison conceded in the commission on Friday.

"And the department certainly thought I got it wrong because, on getting my advice, they said they wanted to mediate."

Nevertheless, it was another 2½ years before the state engaged in meaningful settlement talks with the victims.

In April this year, 5½ years after the action was launched, the government agreed to apologise for the abuse and pay each victim $107,000 in damages.

More than $2 million of taxpayers' money had been spent legal costs.

The hearing continues.