Cardinal George Pell says challenging a sexual abuse victim in court was legally proper and did not mean the church denied the abuse actually happened.

Cardinal George Pell insists he acted truthfully when he instructed lawyers to vigorously dispute the claims of a sexually abused former altar boy in court, even though he knew the claims were true.

Dr Pell, appearing before the royal commission into child sexual abuse, admitted the Catholic church did not deal fairly with victim John Ellis “from a Christian point of view”, but in a legal sense it did nothing improper.

He said he defended the Ellis case vigorously to discourage other complainants from going to court, revealing he was worried that payments for abuse cases in the US sent some churches bankrupt and he wanted to ensure similar situations could not occur in Australia.

At the end of his second day of evidence to the commission, Dr Pell’s admissions were condemned by victims’ families.

“We’ve seen a sociopathic lack of empathy this morning from this man,” said Anthony Foster whose two daughters were raped by a priest in Melbourne.

“I really wonder if he has any idea whatsoever what these people go through.”

Dr Pell expressed regret over the handling of Mr Ellis’s case, starting from the diocese’s refusal to settle the matter in 2004 before Mr Ellis started legal action.

“I understood insufficiently just how wounded he was,” he told the commission.

The former archbishop of Sydney told the commission on Wednesday that disputing that Mr Ellis had been abused by pedophile priest Father Aidan Duggan in the 1970s did not mean he denied the abuse took place.

The church had already found that Mr Ellis had been abused by Fr Duggan but in 2006 Dr Pell instructed the church’s lawyers to proceed with an appeal in which Mr Ellis was cross-examined at length about the veracity of his claims.

Senior counsel assisting the commission, Gail Furness SC, asked Dr Pell if his instruction to his lawyers, Corrs Chambers Wesgarth, was “to dispute Mr Ellis had been abused as he claimed?”

Dr Pell replied: “Yes. Not to deny it.”

He said his lawyers had explained the tactic was “legally proper”.

“In doing so I was not violating my obligation to truthfulness,” Dr Pell said.

Dr Pell said his “error of judgement” was mitigated by a mistaken belief that Mr Ellis wanted millions in compensation, and by how busy he was at the time.

“I mean, it was at the centre of Mr Ellis’s life – with a busy archdiocese, I wasn’t focused sufficiently on it,” he said.

Ellis lost the case and Pell said he was consoled by the court ruling that the church’s trustees, which hold its property assets, could not be sued.

“One of the few consolations, if that’s what I’ve got from this sorry mess, is that the court of appeal unanimously endorsed the view that the trustees were not responsible in this case,” he said.

Ms Furness asked Dr Pell if he had defended the Ellis case to make plaintiffs “think twice” about suing the church.

Dr Pell said he wanted them to “think clearly”.

“They should consider the advantages in not going to litigation,” he said.

He denied, however, that he wanted sexual abuse victims to go through the Catholic church’s internal system, Towards Healing, rather than the courts, so that the church could control the size of payouts.

Dr Pell appears before the commission again on Thursday before leaving Australia to start a new job as manager of the Vatican’s finances in Rome on Monday.