A woman and man have been shot by police at a swingers party at King Street nightclub Inflation in Melbourne's CBD.
Police said the shooting happened after a 35-year-old man pulled a handgun on police just after 3am.
However, a source at the nightclub has told Fairfax Media the gun was a fake and part of a costume. They said police fired three shots just after 3:40am and that following the shooting the man was Tasered by police.
The source said the man was dressed as the Batman character the Joker and was attending a Saints & Sinners Ball at the club with a female companion dressed as Harley Quinn. The Saints & Sinners Ball is described as 'Australia's raunchiest party' for 'broadminded adults'.
The witness said the couple were engaged in a sexual act in front of other party-goers when about 40 police stormed into the club.
Police have confirmed that security staff at the club told police they believed the man's gun was a fake.
Victoria Police Northwest Metro region Superintendent Lisa Hardeman said after entering the club police had called on the male, who took the gun from his pants and aimed it at police.Â
She said police told the man to drop the gun and then fired a number of shots.
"I do believe that security were informed that it was a fake gun," she said.
"That was told to police and that formed part of our planning, but when the firearm was levelled at police and police asked the man to drop it, police at that stage were not aware whether it was an imitation or a real firearm."
She wouldn't confirm if the man was Tasered after he was shot, saying a "number of police options were used".
The woman was shot in the leg by police and was taken to hospital with non-life threatening injuries.
The man is fighting for his life after being taken to the Royal Melbourne Hospital in a critical condition. The woman was taken to The Alfred in a stable condition, an Ambulance Victoria spokesman said.
When asked why the woman was shot, Superintendent Hardeman said: "the woman was in close proximity to the male ... as [police] opened fire, she was also injured".
Superintendent Hardeman wouldn't confirm how many shots were fired or how many police were involved in the shooting.
She said police received "a number of phone calls in relation to the male with the firearm, including from the venue".
"People observed the firearm down the front of his pants."Â
Superintendent Hardeman said she was satisfied with the conduct of the police members involved in the incident.
"Yes, I am very satisfied that police have acted as per our training and certainly that will also be looked at through the course of the investigation," she said.
"...You need to make a split-second decision to protect yourself. Police don't come to work to shoot people, they come to work to do their job."
Superintendent Hardeman said there were around 100 people at the venue at the time of the incident which occurred in "nightclub conditions" with low lighting and noise but that the shooting took place in front of about 10 people.
Detectives will investigate the shooting with oversight by Professional Standards Command as is usual when there has been a police shooting.
The shooting could further inflame tensions between the club and police.Â
The club's owner Martha Tsamis is suing the state government over interviews given by the now boss of Victoria Police's Professional Standards Assistant Commissioner Brett Guerin.
The legal action relates to comments made by Mr Guerin to the Herald Sun and radio station 3AW that the club was a "honeypot" for drug dealers.
Ms Tsamis claims the comments damaged her reputation and caused her to suffer losses. In court documents, lawyers for the state denied most of the alleged remarks made to the Herald Sun and 3AW were defamatory.
They argued the alleged statements were true and correct and were fair comment on a matter of public interest.
The case was adjourned in May.
Nightclub-goer, Damon Oppatt, 26, said he was on his way to the Clique Lounge Bar on King Street when he noticed police.
"The shooting happened before I went to Clique. The street was blocked so I had to divert," Mr Oppatt said.
"There were a lot of police and a lot of flashing lights. I would say there were close to 50 police."
Stacey and Damien, who didn't want to give their last names, were also out at 5am, trying to make their way to a club on King Street when they were stopped and told to go around the block.
Damien, who lives nearby, said he came clubbing to King Street once every six weeks.
"It was shocking it happened on such a busy night, but we are not surprised it's happening," Damien said.
"This wouldn't keep us away."
Police tape divided one half of King Street, between Flinders Lane and Collins Street, as late-night stragglers made their way home about 6am on Saturday.
Police guarded both ends of the street while a police van with flashing lights remained parked in front of Inflation. Music still thumped from a nearby venue.
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Any witnesses have been asked to contact CrimeStoppers on 1800 333 000 or go to www.crimestoppers.vic.com.au