England’s most senior Catholic clergyman ordered lawyers not to disclose a complaint of child abuse made against JRR Tolkien’s son, an inquiry has heard.

Cardinal Vincent Nichols, who faces criticism over his handling of allegations against Father John Tolkien, apologised in a letter to the independent inquiry into child sexual abuse on Monday. Nichols, the archbishop of Westminster, was due to give evidence on Tuesday over his handling of the affair but pulled out due to illness.

The Catholic church knew that Tolkien, the eldest son of the acclaimed author of Lord of the Rings, posed a risk to children after a note was made in 1968 that he had told boy scouts to strip naked, yet he was allowed to continue working for decades, the hearing was told.

When more of Tolkien’s alleged victims contacted the church with civil claims in the early 2000s, after charges against him were dropped owing to ill health, Nichols, then the archbishop of Birmingham, told a lawyer acting on behalf of the diocese that he would “prefer not to disclose” the earlier complaint.

In reference to the Catholic church’s record of the 1968 incident, the hearing heard that a lawyer acting for the diocese wrote to Nichols in 2003: “You have said that the archdiocese would prefer not to disclose this document even if it means settling the action.”

Rather than revealing knowledge of the incident, the church settled with one victim, Christopher Carrie, who said he was abused by Tolkien at age 11 in the 1950s, by paying him £15,000 in 2003, the inquiry at Pocock Street tribunal hearing centre in London was told on Monday.

The inquiry heard that at least four other people made abuse allegations against Tolkien. It is understood that several civil claims over abuse committed by Tolkien have been settled by the church.

The Birmingham diocese, which Nichols ran from 2000 to 2009, was also criticised by a lawyer during the hearing for issuing press releases at the time of the settlement asking people to pray for Tolkien.

Richard Scorer, of Slater and Gordon, representing alleged victims of Tolkien, told the hearing: “It wasn’t settled because Archbishop Nichols wanted to ‘do the right thing’ by a victim of abuse. If you study the file, we suggest it is very plain that Mr Carrie’s claim, and those of other victims of John Tolkien, were settled for one reason and one reason alone – because in the absence of a settlement, the archdiocese would have been obliged to disclose that they had received a complaint, or possibly complaints in the plural, of sexual indecency by Father Tolkien in 1968.”

The first of five days of hearings focusing on child abuse in the archdiocese of Birmingham – the largest in England, stretching from Stoke-on-Trent to south of Oxford – was told that as many as five people accused Tolkien of abuse.

Tolkien denied the allegations. He was investigated by police shortly before his death, aged 85, in 2003 but despite having sufficient evidence for a realistic prosecution, the Crown Prosecution Service (CPS) dropped the case because Tolkien was suffering from dementia. After the case was dropped, Carrie made a civil claim against the church.

When, as an adult in 1993, Carrie had discovered that the priest was working in Oxfordshire, he had reported the allegations to the then archbishop of Birmingham, Maurice Couve de Murville. Jacqueline Carey, the counsel to the inquiry, told the hearing that in October 1993 Couve de Murville wrote to Carrie claiming to have investigated the complaint “as far as possible” but adding that “35 years makes it difficult to establish precisely what happened”.

He said he had interviewed Tolkien, then 76, who was “not in good health”, adding: “It may be of help for you to know that he is now going to retire and cease the active practice of his ministry.” He said Tolkien’s retirement was “perhaps … the answer you seek” but said the church would assist if Carrie wanted to report the matter to police.

In 2000 Carrie wrote to Nichols asking him to investigate the matter. In 2002 another complainant came forward to allege they had been abused by Tolkien, writing to Nichols: “Well I know for sure Mr Carrie is telling the truth because I too was abused myself. I know Father Tolkien is 84 years old and suffering from dementia but it is wrong for him to keep saying he never did these things – he did.”

Nichols advised the complainant to report it to the police. Police investigated Tolkien but the CPS decided after a medical assessment it was not in the public interest to proceed, the hearing was told.

Richard Horwell QC, representing the archdiocese of Birmingham, read out an apology written to the inquiry from Nichols saying: “Often in the past we failed to respond promptly and vigorously to the cries and accounts of victims. We followed our instincts in trusting those fellow priests who were in fact criminals. We put too much in our sense of duty to shield other Catholics from these horrors, putting what we saw to be the good of church before a search for the truth of what happened.”