Sir Ronald Waterhouse investigated abuse at children's homes

In February this year the panel decided O had complained too late, and it was not satisfied he was telling the truth.

However, on Wednesday, a High Court judge in London allowed O's challenge to the panel's decision and ordered it to reconsider its ruling.

He refused the panel permission to appeal, although it can still ask the Court of Appeal itself to consider the case.

Mr Justice Wilson said consultant psychiatrist Dr Trevor Friedman had told the panel he believed O's account of being sexually abused by Bryn Alyn's founder and owner, John Allen.

Allen was jailed in February 1995 for six years for indecently assaulting six boys in his care.

The judge decided the panel had "improperly" rejected O's claim for compensation as a victim of crime without referring to the expert's evidence in its decision.

Private company

"I consider it would have been wise for the panel to refer in its decision to Dr Friedman's report," said the judge.

The panel had also failed properly to address O's claim over the physical abuse he said he had suffered, he said.

Earlier this year, 13 former residents at five children's homes run by the Bryn Alyn company, a private company which went into voluntary liquidation in 1997, received High Court damages totalling more than �300,000 for abuse suffered at the hands of staff over three decades beginning in the 1970s.

Sums ranging from �5,000 to �47,000 were awarded.

The homes had been investigated in a government-backed inquiry by Sir Ronald Waterhouse which revealed that abuse was rife.

In February - on the first anniversary of the Waterhouse Report - it was revealed that around �4m in compensation had been paid to victims.