In the freshwater streams of eastern Australia lives a most unusual creature. Fur like velvet, a beaver like tail, and a soft duckish bill, this odd-looking creature can make a curious sight for those who see it for the first time.

When first seen in 1797 by early white settlers near the Hawkesbury River, outside Sydney, it triggered a search and controversy that lasted almost a century. Nicknamed the 'watermole', it was said to be a combination reptile, bird, fish and furred animal. The perplexed local governor sent specimens back to mother England for study.

But the English found it equally unbelievable. One zoologist suggested it was 'freak imposture' sold to gullible seamen by Chinese taxidermists. Another, suspecting fraud, tried to pry the 'duck's bill' off the pelt; the marks of his scissors can still be seen today on the...