Survivors of sexual abuse at Stanhope Castle Approved School in County Durham faced a "baffling, frustrating, hostile and futile" legal process when seeking compensation, according to a major national inquiry.
The report, published by the Independent Inquiry Into Child Sexual (IICSA), heard from 40 witnesses during 15 days of public hearings.
Allegations of child abuse made to Durham Constabulary in 1999 were "not properly investigated" and no prosecutions arose "out of the physical or sexual abuse at Stanhope Castle", the report concludes.
Middlesbrough Council are also criticised for their handling of compensation claims by victims of abuse.
The Council, which became liable for Stanhope Castle after the abolition of Cleveland County Council in 1996, received 33 civil claims relating to physical and sexual abuse at the school, which closed in 1981.
The report criticises the council's failure to settle these claims and its reliance on limitation periods - a time limit within which claims have to be made - as a defence against victim's claims for compensation.
"It was always open to the Council to settle the claims", the report says. "Not doing so is even more difficult to understand given that, on the evidence available to us, the Council had the means to pay."
The report also says the Council's attitude "compares poorly" with that of other councils.
IICSA is investigating allegations against local authorities, religious organisations, the armed forces and public figures.
The report focuses on the aftermath of child sexual abuse, including compensation schemes and support services.
Stanhope Castle was one of five 'case' studies examined as part of the investigation.
The school, in Weardale, housed boys as young as nine, many of whom had committed minor offences or couldn't be looked after by their parents. It opened during the Second World War.
The inquiry's full public hearings, which consists of 14 separate investigations, are expected to last until 2020.
The inquiry has already published an interim report, making 14 recommendations, concluding that responsibilities to child abuse "deflected responsibility away from perpetuators and institutions."