A former detective and a double murderer have been excused from giving evidence at the inquest into the ‘‘cold-blooded’’ execution murders of police informer Terence Hodson and his wife Christine.

Victoria’s State Coroner Judge Ian Gray on Tuesday ruled that he was not satisfied it was in the interests of justice that ex-drug squad officer Paul Dale and Rodney Collins be compelled to give evidence.

Mr Dale and Collins - who is serving a sentence for an unrelated double murder - last week took to the witness box at the inquest to tell Judge Gray they did not want to give evidence.

The Hodsons were both shot in the back of the head at their Kew home on the weekend of May 15 and 16, 2004.

In his decision, Judge Gray said he could still make adverse findings despite not hearing evidence from both men.

While it was "highly desirable" to hear from Mr Dale and Collins, he was persuaded each would be exposed to a "forensic risk" in evidence that could amount to "real prejudice".

Judge Gray also noted that the inquest had "barely started" and that later both men may be referred to the Director of Public Prosecutions.

In 2009 Mr Dale was charged with the murder of Mr Hodson, while Collins was charged with both murders. Both have denied involvement.

But the charges against both were dropped after gangland boss Carl Williams was bashed to death in 2010 in the maximum security Barwon Prison.

The inquest has heard that Williams was offered inducements of an "extraordinary ilk" to make a statement implicating Mr Dale and Collins in the Hodsons’ murders.

Mr Dale's barrister, Geoffrey Steward, said Williams wanted his father's $750,000 tax bill forgiven, his daughter's school fees paid, his own jail sentence reduced and to be eligible to collect a $1 million reward offered over the Hodson murders.

Mr Steward said Victoria Police had maintained an "obsessional pursuit" of Mr Dale and that the case against him was based on the statement of the "serial killing, disreputable, drug trafficking and despicable character that Carl Williams was".

He said the inducements offered to Williams highlighted the "transparent veneer" police had in believing Mr Dale was responsible, despite "exhaustive investigations" against him.

"It is almost inconceivable that a man could be charged with murder on the say-so of Carl Williams with those incentives," Mr Steward said.

Catherine Boston, representing Collins, said a certificate provided by the State Coroner would not truly protect her client, as police could still pursue another line of inquiry based on any evidence Collins gave.

But Rachel Doyle, SC, representing Victoria Police, said the need to ensure the administration of justice could "trump" the wishes of both men, and the fact their evidence would help Judge Gray perform a thorough investigation might provide the Hodsons' family with answers and promote public confidence in the justice system.

Ms Doyle said Mr Dale and Collins had previously "cherry-picked" by speaking with police when it suited them, and that the former detective had written a book about his experiences.

She also said much of what Williams told police had been objectively corroborated. "In other words, it checked out," she said.

A lawyer representing the Hodsons' daughters, Mandy Hodson and Nicola Komiazyk, said the family wanted Mr Dale and Collins to give evidence.

When the inquest started, counsel assisting the coroner Christopher Winneke said it would question whether police did enough to protect Terence Hodson and his wife once he had agreed to testify against then detectives David Miechel and Paul Dale after the three men were arrested over an attempted burglary at an Oakleigh drug house.

Mr Winneke said Hodson’s decision to serve as a prosecution witness against his co-accused raised security concerns for police, as did Hodson’s interference in the ‘‘high-level’’ drug operation he had tried to burgle with Miechel (Mr Dale had been accused of masterminding the burglary, but denied the allegation).

A third area for concern for police, the court heard, was that it had become known within criminal circles that Hodson was providing police with information. This was a ‘‘particularly dangerous activity’’, Mr Winneke said.

The court heard Hodson had declined the offer of going into witness protection but had taken his own measures to improve security at his house.

The home was fitted with security doors, metal grilles on windows, and motion detectors, the court was told, and the Hodsons had two guard dogs and a loaded gun in the house. Two surveillance systems were also in operation, Mr Winneke said, but police found the videotape was missing from the recorder on the weekend the Hodsons were killed.

There were no signs of a forced entry into the home or of a struggle, the court heard, and a dossier detailing the information Terence Hodson had provided to the police had been widely distributed among criminal circles.

Mr Dale had charges related to the burglary attempt dropped following the Hodsons’ deaths. Miechel was later jailed for 15 years for the attempted burglary.

Mr Dale and Collins were later charged over the murders but those charges were withdrawn after Williams was bashed to death in prison.

Mr Winneke told the court some circumstances of the ‘‘cold-blooded killings’’ were known, but not who was responsible.