Cardinal George Pell’s morality has come under sustained challenge at the Royal Commission into Institutional Responses to Child Sex Abuse.

Pell said his instructions to "vigorously" and "strenuously" defend claims by John Ellis that he was abused were intended to discourage claimants, so they would "think clearly" before litigating against the church.

The Cardinal has defended disputing in court whether Mr Ellis was really abused. Pell said his lawyers assured him it was a “proper” legal tactic and Mr Ellis was a senior lawyer who would have understood he was not disbelieved.

Pell admitted he accepted Mr Ellis’ allegations, just as the church’s own review had done, but even so he gave the instructions which resulted in Mr Ellis being subject to four days of gruelling cross-examination in court on whether and how he had been abused.

Gail Furness, SC, counsel for the Royal Commission, asked: “Do you understand now the impact it had on John Ellis, to have the very church that he had gone back to … to dispute that he had been abused?”

“I do”, Cardinal Pell responded.

Asked by Ms Furness what he had to say about it, he said “I regret it”.

“Only regret it? Cardinal?”

“What else could I say?” Cardinal Pell asked. “It was wrong that it went to such an extent. I was told that it was a legally proper tactic, strategy”.

The Cardinal said Mr Ellis’ status as a senior lawyer had influenced his handling of the case. He said “we would never have run this case” but Mr Ellis “presented very well” and was “such a senior lawyer” he underestimated “just how wounded he was”.

It was a mistake not to mediate in 2004 and he should also have counter-offered when Mr Ellis offered $750,000 to settle, the Cardinal said.  There was “a succession of decisions we took which in retrospect were mistaken’’, Pell told the commission. But he said he viewed “every approach (Mr Ellis’ team) made” through a prism that “we’re not really dealing with entirely reasonable people”. He said this was because his lawyers told him Mr Ellis’ team had no hope of winning its case.

Cardinal Pell said the lawyers he engaged, Corrs Chambers Westgarth, had done “nothing inappropriate” in the case he described as “this sorry mess”. But “one of the few consolations” was that the Court of Appeal had accepted the Archdiocese’s argument that its trustees could not be sued because they were not responsible for the actions of priests.

Mr Ellis was abused by the priest Aidan Duggan in the Bass Hill parish from when he was a 13-year-old altar boy. He lost his landmark damages case against the Sydney Archdiocese which established a defence which has shielded the church from damages claims in similar litigation.

Mr Ellis was a $300,000 a year partner with Baker & McKenzie until he began to come to terms with the realities of the abuse. The litigation broke him financially and mentally, and finished up costing the church $1.5 million, including $568,000 in ex gratia payments to Mr Ellis.

Cardinal Pell admitted his reasoning in deciding not to mediate with Mr Ellis in 2004 was “a bit confused and muddled” and “quite deficient” but he didn’t want to “interfere” with the integrity of the church’s Towards Healing process.

Justice McClellan challenged him: “If you were to make an informed and just decision about what your response should be you would want to know what the previous discussions were?”

The Cardinal responded that he presumed those who were representing him in the negotiations had acted “within the normal sorts of parameters”.

The hearing continues.