A victim of a pedophile priest was told by the man investigating on behalf of the Catholic Church that he should sue the church.

The man in charge of investigating pedophile priests in Melbourne told one victim to sue the Catholic Church.

The priest had been moved to the victim’s parish after allegations of abuse elsewhere were reported to the church.

Melbourne Response independent commissioner Peter O’Callaghan QC told the child abuse royal commission he believed the man had a case for compensation through the courts.

“I said to him, `Look, I know that you should get independent legal advice because there may be an action open to you’,” Mr O’Callaghan told the commission on Tuesday.

“I thought he would have much more success, and I think he did.

“I don’t recall the details of it, but typically of course if you can mount a case at common law you will recover much more than the ex-gratia compensation.”

Payments under the Catholic Church’s Melbourne Response – introduced in 1996 to handle allegations of clergy sex abuse in the Melbourne archdiocese – were initially capped at $50,000 and later $75,000.

Victims who have won legal cases against the church got an average of $293,000.

Commission chairman Justice Peter McClellan repeatedly asked Mr O’Callaghan if in 18 years of hearing victims’ stories, he thought the capped payments were fair.

“I don’t think it’s appropriate for me to make any public statement,” Mr O’Callaghan said.

Melbourne Archbishop Denis Hart has promised to look at reviewing compensation payments paid under the Melbourne Response.

Mr O’Callaghan said he had been surprised by the lack of questionable complaints from people looking for compensation.

“I’ve reached a clear impression that one doesn’t fake stories about sexual abuse,” he said.

Under the Melbourne Response, 326 victims’ abuse claims have been upheld.

Mr O’Callaghan said when he was appointed in 1996, he expected the process to last six months.

Instead, 18 years later, he is still getting calls from victims looking to tell their story and get compensation, including one during a break in the commission hearing on Monday.

The federal government is still considering whether to extend the term of the royal commission, which has asked to run until 2017.

News Corp reported that private hearings would end in September without more funding, meaning 3000 victims would not be heard.

A spokesman for Attorney-General George Brandis said the government was “actively considering” the commission’s request.

“The government has always supported the important work of the royal commission and has always supported provided sufficient funds for it to carry out its work,” he told AAP.