The country’s most senior Catholic clergyman has denied allegations he covered up a complaint of child abuse against one of JRR Tolkien’s sons.

Despite defending his actions, Cardinal Vincent Nichols conceded he had been wrong not to reveal to Father John Tolkien’s alleged victims that the church had made a note of a complaint in 1968 that the priest had ordered boy scouts to strip naked.

Nichols, the archbishop of Westminster, argued the note had not been hidden as it was made available to police, even though it was not disclosed to claimants.

Giving evidence to the independent inquiry into child sexual abuse on Thursday, after he pulled out of a session last month because of illness, he also revealed he was lobbied by lawyers acting on behalf of Tolkien’s family who did not want the church to accept liability or reach a settlement.

When the church faced civil claims from Tolkien’s alleged victims 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 1968 complaint.

The note meant the church knew Tolkien, the eldest son of the Lord of the Rings author, posed a risk to children as early as the 1960s but was allowed to continue working for decades. The priest, who denied the allegations, died in 2003.

Nichols told the inquiry his main objective in dealing with the civil claim against the church was “to try and avoid civil action in court”.

One of the claims was made by Christopher Carrie, who was eventually given £15,000 by the church after alleging Tolkien had sexually assaulted him aged 11 in a Birmingham church in the 1950s.

Asked by the inquiry’s counsel, Jacqueline Carey, whether he had covered up the note to protect the church, Nichols said: “If I may put a gloss on that, it was never a question of money. I think I took both a pragmatic and a prudent decision in seeking to settle this claim, even though I knew it would be followed by other claims on the same basis.

“But I can only repeat what I said: I was not aware that it would be a due process to let the claimant see whatever was there, nor was that suggested to me, and my focus remained on settling rather than hiding from the claimant a note which was relevant.

“As I say, it was not [hidden] – it was disclosed to the police in their investigation, and in that I thought that was the disclosure that was due. I was wrong.”

Nichols – who was archbishop of Birmingham from 2000 until 2009 – drew the inquiry to the input of solicitors acting on behalf of the Tolkien family at the time. Asked why he was concerned about the Tolkien family, Nichols referenced a letter from their solicitors, saying: “They were very firm in asserting their position that it would be quite improper for the diocese to admit legally that these acts had taken place because Father Tolkien would have no opportunity to defend himself. They were firm in their insistence, therefore, that the diocese should not admit liability and they were firm in their insistence that no settlement should be agreed.”

When pointed out it was a matter for the church if it settled the claim, Nichols said: “As much as it would inevitably involve the Tolkien name, then I think it was a matter for them. At least they certainly thought so.”

Nichols said Tolkien’s family had “a reasonable position that I had to consider”, adding that the diocese concluded that it should settle but that it “needed also the agreement of [the Tolkien family solicitors] ... on behalf of the Tolkien family”.

Tolkien was sent for therapy after the 1968 complaint, the inquiry also heard. Nichols was played a harrowing recording from evidence previously given to the inquiry from another alleged victim of Tolkien who claimed he was abused after 1968 and accused Nichols of having “the nerve to start talking to solicitors about covering things up”.

Asked about the allegation he covered up the note, Nichols said: “In the context of the claim and the discussions with the solicitors, my priority was to get that settled, and when that was settled I simply didn’t give the matter any further thought, for which I apologise.”