MARK COLVIN: The Catholic Church has admitted that a conflict between its own moral values and its legal and financial interests was at the heart of its battle with abuse victim John Ellis, and in the fight between secular and Christian values, it was the law and the money that won.

The Archbishop of Sydney, George Pell, told the Royal Commission today that he overcame his own moral doubts to endorse the strategy of the church's legal team.

That included the tactic of disputing Mr Ellis's story of abuse in court.

While preparing his departure for the Vatican, Cardinal Pell has spent a second day in the witness box defending the church's legal position when Mr Ellis tried to sue.

Cardinal Pell admitted that Mr Ellis was not treated fairly from a "Christian point of view" and the compensation offers to him were mean and grotesque.

Emily Bourke reports.

EMILY BOURKE: The moral and the legal positions taken by the Catholic Archdiocese of Sydney came into sharp focus and then collided at the Royal Commission today.

The former Sydney archbishop George Pell was asked if the church had been honest and fair when former altar boy and abuse victim John Ellis brought his complaint to the church 10 years ago and it ended up in bitter court battle.

GEORGE PELL: In a legal sense, we always acted honestly and I believe in a legal sense, there was nothing done that was improper, and any reservations I might have about particular stands of our lawyers, I would not want to suggest that they did anything improper.

But from my point of view, from a Christian point of view, leaving aside the legal dimension, I don't think we did deal fairly.

EMILY BOURKE: Cardinal Pell admitted that he had some misgivings about the church's lawyer arguing that Mr Ellis could not sue the trustees of the church over the abuse he suffered at the hands of a priest.

GEORGE PELL: I initially was uncertain about the propriety of that defence. I am not a lawyer; it was pointed out to me, I think successfully, that the role of the trustees was quite limited to the ownership of property.

If for example there was negligence in building, if for example there was asbestos, then the trustees could be sued on that account, but as they had not been involved in the appointment and supervision of priests, they could not be sued. They did not have liability on that count. I was told - and I believe that this is correct - that this did not represent any development in the law.

EMILY BOURKE: Having endorsed the strategy to defeat the case, protect the trustees, and resist what he believed was an exorbitant damages claim, Cardinal Pell also approved the legal tactics.

But senior Counsel Assisting the inquiry, Gail Furness, pressed him on the decision to dispute Mr Ellis's story of abuse in court.

GEORGE PELL: I was told that what was being proposed was not only proper legally, but not unusual.

GAIL FURNESS: What about morally, Cardinal?

GEORGE PELL: Well, I have explained my moral doubts about it but the lawyers, no-one has accused them of acting - well perhaps, anyhow, I did not believe that they would suggest anything to me that was improper. I think the length of the cross-examining was quite inappropriate.

GAIL FURNESS: Do you understand now the impact it had on John Ellis to have the very church that he'd gone back to in Towards Healing dispute that he had ever been abused?

GEORGE PELL: I do.

GAIL FURNESS: And what do you have to say about that?

GEORGE PELL: I regret that.

GAIL FURNESS: Only regret it, Cardinal?

GEORGE PELL: What else could I say? It was wrong that it went to such an extent.

EMILY BOURKE: Under questioning by Justice Peter McClellan, it emerged that the overall approach taken by the church was informed by events overseas.

PETER MCLENNAN: You were concerned that what had happened in America, where there were very large verdicts and dioceses had gone bankrupt, should not be a scenario in Australia, weren't you?

GEORGE PELL: That is certainly the case, and there are two considerations there: Australia is not America. There are an enormous number of lawyers there, disproportionate even by Australian standards; and secondly, that whatever standards of damages were to be enforced, they should be equal across all the Australian institutions.

PETER MCLENNAN: You were concerned that what had happened in America could happen in Australia, weren't you?

GEORGE PELL: Yes, and I did not want that to happen just to us. If it was to happen, it was to happen justly.

EMILY BOURKE: But he also faced questions about the how the church's Towards Healing scheme has delivered justice and compassion to Mr Ellis.

GAIL FURNESS: Do you accept, Cardinal, that the Archdiocese, in its conduct of the Towards Healing complaint by Mr Ellis, fundamentally failed Mr Ellis?

GEORGE PELL: It didn't completely fail him or fundamentally fail him because his case inched forward, as we now know, at his urging. But by any criteria, there was a substantial failure.

GAIL FURNESS: There was a failure to follow your own protocol, was there not?

GEORGE PELL: Um, yes.

GAIL FURNESS: There was a failure to act justly and compassionately towards him?

GEORGE PELL: That is correct. That, to some extent, was inadvertent.

GAIL FURNESS: And the offers that were made to him in the facilitation were just plain mean, weren't they?

GEORGE PELL: That is correct.

GAIL FURNESS: And indeed the increase of $5,000 was grotesque.

GEORGE PELL: That is correct.

EMILY BOURKE: Cardinal Pell will return to the witness box tomorrow.

MARK COLVIN: Emily Bourke.