The former headmaster of Knox Grammar School Ian Paterson did not realise that it was a crime for a teacher to grope and sexually proposition a student, a royal commission has heard.

Dr Paterson, who ran the school for almost three decades, also admitted he did not regularly conduct background checks on teachers employed at the elite boys school, nor was he aware of child protection laws introduced in the 1980s.

Appearing before the Royal Commission into Institutional Responses to Child Sexual Abuse, Dr Paterson admitted he was an "abject failure".

Under cross examination by counsel assisting David Lloyd, Dr Paterson also admitted he provided glowing references to teachers whom he knew or suspected had inappropriate dealings with students.

Dr Paterson told the commission that a student complained to him in 1989 that teacher Damien Vance had groped him and propositioned him while they were smoking under the Knox chapel.

He recalled telling the boy it was a "serious allegation" and he should "sit in the library and think about what he said."

"The boy was a drama boy," Dr Paterson said. "He was known as a rather theatrical boy who could build up situations and it was that for reason knowing him as I did that I asked him to think about what he said."

He agreed that the boy was telling the truth but told the commission he did not believe what had occurred was a criminal offence which should be reported to the police and the Department of Community Services.

"I was not aware that it was a crime," he said.

Vance was allowed to resign from the school and later provided with a glowing reference in which Dr Paterson praised him as a "strong teacher" despite awareness of the indecent assault and two previous physical assaults on boys.

Vance was later arrested in 2009 and convicted of sex offences.

The commission heard former biology teacher Roger James was also provided with a positive reference despite Dr Paterson being concerned he was becoming "too close" to boys.

Dr Paterson told the commission that although he was aware James was taking a job at another school in New Zealand, it did not occur to him at that time to alert the school about his suspicions.

James was also arrested in 2009 and convicted of sexual offences against one student.

The commission heard that teachers and resident masters were regularly employed without background checks, particularly old boys of the school seeking employment.

Dr Paterson said he did not consider that to be a failure of duty.

"The times were quite different then we judged people very much ourselves by making our own judgements on people, particularly the boarding master and I would not consider that a failure," he said.

Former religious education instructor Christopher Fotis was employed at the Wahroonga school despite having multiple criminal convictions, the commission heard.

Fotis was asked to leave Knox after being arrested for masturbating outside a school in North Ryde in 1989. He has not been convicted of any crimes in relation to Knox but there is a warrant for his arrest following his failure to appear at the royal commission.

Dr Paterson told the commission he was unaware that teaching staff had a legal obligation to report abuse to the authorities and he could not recall any staff receiving training about mandatory reporting requirements.

Before giving evidence, Dr Paterson made a statement to the commission apologising for his actions.

"As headmaster I am responsible for all that occurs during my headmastership there were matters that I knew about and other matters that I did not," he said.

"However, without doubt I should have known and I should have stopped the events which led to the abuse and its tragic consequences for those boys in my care and their families."

The hearing, before Justice Jennifer Coates, continues.

• Adults Surviving Child Abuse: 1300 657 380
• Survivors and Mates Support Network: 02 8355 3711
• Bravehearts: 1800 272 831