MELBOURNE'S Catholic Church is under pressure to overhaul its handling of sexual abuse cases after revelations that a priest accused of abusing a minor was told beforehand that he was the subject of a covert police probe, undermining the investigation.

The pressure is likely to intensify amid claims from the Catholic Vicar- General, Bishop Les Tomlinson, that there exists a sexual abuse ''victims' industry'' that seeks to exploit victims' suffering to make money.

The priest who was told of a police investigation is the now-convicted sex offender Paul Pavlou. Pavlou was informed of the police inquiry by a church-appointed investigator in July 2007, only days after his victim's lawyer requested that the priest not be told of the investigation. Three weeks later, police raided Pavlou's house and discovered the priest's computer had been wiped. They also found a letter warning him of their inquiry.

The Age's investigation into the Melbourne Archdiocese's system of handling sexual abuse cases - known as the Melbourne Response - can also reveal that St Patrick's Cathedral's July newsletter named as a ''living treasure'' a priest who - according to the church's own investigator - had sexually abused at least three women, including a former nun. The former nun, Catherine Arthur, has said the naming of James Barry Whelan as ''living treasure'' was deplorable, while the archdiocese has said it was the result of a mistake and has apologised.

In another case, a victim of a pedophile priest had questioned why the church-appointed investigator warned him only after interviewing him - rather than before - that the interview could be used in any future court cases. Lawyers for pedophile priest Terence Pidoto later used the interview to question the victim in court.

Thirteen sexual abuse victims have formed a collective - which includes families and advocates and is backed by two interstate bishops - calling for a review of the so-called Melbourne Response.

The Melbourne Response was set up by archbishop George Pell in 1996 and has handled about 450 cases. Its inquiry arm is headed by a church-appointed barrister and respected Queen's Counsel, Peter O'Callaghan, while its compensation panel has offered up to $55,000 to about 280 abuse victims. All but six have accepted the pay-out.

In dismissing claims that the Melbourne Response is sometimes intimidating, flawed and in need of review, Bishop Tomlinson toldThe Age: ''You could perhaps draw a conclusion that there is what could be termed a victims' industry … willing to exploit these victims for their own gain.''

Asked who was in the industry, Bishop Tomlinson said: ''I think that is apparent enough … I am not saying the victims' support groups per se are suspect but I would also be saying there is the scope for an abuse to occur there.''

In a letter to the victims' collective, retired Sydney bishop Geoffrey Robinson, who headed the Australian church's response to the clerical sexual abuse crisis in the 1990s, said that ''a thorough review of the Melbourne Response … (was) most timely''.

''I have over the years heard a number of reports of victims feeling intimidated by the system itself. These feelings need to be heard and addressed,'' Bishop Robinson said.

Newcastle bishop Michael Malone has told the victims' collective that ''I applaud your initiative'' and that he would not excuse a church ''which refuses to listen or admit there is fault''.

The Age's investigation into the handling of the Pavlou case by the church can reveal:

■ A church official disclosed to the victim's mother during a taped interview in late 2006 that ''because he [your son] is the youngest person who has come through the process we are feeling our way a bit and we don't want to make it such a big issue … like if he [your son] has got it under control. So we are learning as we go here.''