Speaking as a pagan, I think you handled it properly. You talked about how a problem between just a few people could cause the destruction of the entire community.

I would say the first student did a wrong to the third student by writing down something hurtful. If the first student did not want anyone to know what was thought of the third student, it should not have been written down. The second student increased the wrong to the third student by making the student aware of the hurtful comment.

As the subject of the hurtful comment the third student had the right to do with the paper what ever they wished. I would have allowed student number three to destroy the paper, or to choose someone else to dispose of it.

Now how do you teach this lesson to adults?