A paedophile priest told a bishop children "enjoyed" sexual activity and asked the Catholic Church for a $25,000 loan at the same time he was being blackmailed by one of his victims, according to documents tendered in evidence to a royal commission.
John Joseph Farrell, who was jailed in May after pleading guilty over a string of sexual offences against youngsters, "never expressed any regret for his actions" according to former Parramatta bishop Kevin Manning.
A 2005 letter from Bishop Manning, tendered to the Royal Commission into Institutional Responses to Child Sexual Abuse, recounts a meeting with Farrell in which he confronted the priest about "widespread sexual activity with children".
"When confronted with facts [Farrell] said: 'I don't know what you are on about, these kids came looking for it, they enjoyed it'," Bishop Manning wrote.
Farrell was laicised from the priesthood in 2005 after being stood down in 1992 following a series of child sex abuse allegations against him, the commission heard.
According to documents tendered in evidence, church officials discussed continuing to pay Farrell until 1993.
Farrell wrote to the Armidale Diocese in 1998 asking for a $25,000 loan as he had not been funded by the church for five years, according to a letter tendered to the commission.
Separate documents tendered to the inquiry show Farrell was being blackmailed by one of his victims in early 1998.
The documents were released as part of a public hearing into how the Catholic Church responded to allegations against Farrell, which first surfaced in 1984.
Farrell's 2005 application for dispensation from the priesthood, tendered in evidence, contains claims of drunkenness and "wild sexual activity" at St Patrick's College in Manly when he was studying to become a priest in the late 1970s.
"Some were out at the pub almost every night and were drinking heavily," Farrell wrote. "Some were regularly involved in wild sexual activity with several other seminarians."
Senior Catholic Church figure Brian Lucas was at the seminary during the same period and told the commission that was "absolutely not" his experience.
Father Lucas, the national director of Catholic Mission, described Farrell as "a bit different" and "delusional" in his evidence to the commission.
The inquiry heard Father Lucas spoke to Farrell about sexual abuse claims against him in the early 1990s but did not refer matters to the police.
Father Lucas, one of the early architects of the Catholic Church's protocol on responding to abuse allegations, denied to the commission he was involved in a "cover-up".
A 1996 paper Father Lucas presented to the Canon Law Society of Australia and New Zealand, tendered to the commission, suggests ways of protecting sensitive documents, including the question of "to shred or not to shred".
"It was a slightly unfortunate somewhat whimsical subtitle," Father Lucas told the commission. "It was never my view that one should shred documents that are compellable."
Father Lucas told the inquiry his approach to questions about Farrell from Four Corners in 2012 was "careless and negligent" but he denied he tried to manipulate the media.
Farrell was charged with child sexual offences in 1987 and 1998 but both cases were dismissed.
The 63-year-old was sentenced to a minimum jail term of 18 years in May after being convicted of 62 offences involving 12 children in Moree, Armidale and Tamworth between 1979 and 1988.
The hearing before Justice Peter McClellan continues.
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