Bishop Heather told the public inquiry he destroyed documents because he was traumatised by a police search of his office as part of an earlier investigation into sexual abuse by clergy.

The Royal Commission into Institutional Responses to Child Sexual Abuse heard Bishop Heather advised his lawyers Makinson & D'Apice of his actions in a 1996 letter.

"Following the police raid on our offices, shortly afterwards I took the precaution of destroying all papers of mine which could have been to the disadvantage of persons with whom I deal," he wrote in the letter which was partly read out before the commission.

In evidence, Bishop Heather admitted he destroyed material which might contain information about crimes committed by clergy.

"You've destroyed documents that might say something which could be adverse to an individual?," commission chairman Peter McClellan asked.

"Yes," Bishop Heather responded.

Justice McClellan: "That would include potential criminal offences?"

Bishop Heather: "It could, yes."

The commission heard Bishop Heather destroyed material relating to a western Sydney priest who was first jailed for child sexual offences in 1994 even though he was aware there were potential further civil claims against the man.

Bishop Heather told the inquiry he became anxious about confidentiality following a police search of his office as part of a separate investigation into a local religious order, St Gerard Majella Society, which was part of the Parramatta Diocese.

"From that point onwards I became a bit cautious about what I kept on file," he said.

"I was traumatised by the event . . . and suffered stress disorder as a result."

Three brothers from the now defunct St Gerard Majella Society - Joseph Pritchard, John Sweeney and Stephen Robinson - were convicted of sexual offences, the commission heard.

Bishop Heather told the inquiry he did not report allegations about the brothers to the police when he first became aware of them.

"No I didn't see that as my obligation," he said. "I suppose I was principally concerned about the impact on the community, the church (and) the community of brothers."

The fourth day of the hearing into how the Catholic Church responded to allegations about jailed paedophile priest John Joseph Farrell heard Bishop Heather accepted him into the Parramatta Diocese in 1990 because he wanted to "give him a fair go" despite knowing of child sexual abuse claims against him.

Bishop Heather told the commission he suspended Farrell in 1992 after learning he had behaved inappropriately with altar boys, checked to see if a school girl was wearing a bra and made a lewd comment to a teacher.

The commission heard Farrell returned to the Diocese of Armidale where he continued to work with children until at least 2000.

Former Bishop of Armidale, Luc Matthys, told the commission he did not believe people who had suffered abuse by clergy should get compensation from the Catholic Church.

The commission heard Bishop Matthys started the process of laicising Farrell on advice he posed an unacceptable risk to children.

Farrell was was sentenced to a minimum jail term of 18 years in May after being convicted of a string of child sex offences.

The hearing will resume on September 19.

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CORRECTION: An earlier version of this story carried a photograph of Father John Boyle who was mistakenly identified as Bishop Bede Heather. Father Boyle has no connection to the subject matter of this story. Fairfax Media regrets the error.