A Dutch plane with a cargo of diamonds crashed off the Kimberley coast at the height of World War II. Worth about $20 million today, why were only a fraction of the gems ever recovered?

Rusting plane wrecks scattered across the Kimberley coast provide evidence of how World War II touched Australia.

When Curious Kimberley was asked about the remains of a Dutch plane 150km north of Broome, a tale of tragedy, wealth and the underdog emerged.

In the height of World War II, the north-west of Australia was attacked by Japanese fighter planes, killing more than 80 people.

A group of Dutch refugees were traveling on a PK-AFV 'Pelikaan' from Java to the safety of Australia when they flew into the path of the Japanese attack.

The plane crashed at Carnot Bay and four passengers were killed — the rest waited days before they were saved.

The pilot Ivan Smirnoff survived and was soon questioned by authorities about a small brown package he was transporting.

Smirnoff was instructed to hand the package to the Commonwealth Bank upon arrival, but in the chaos of the crash it was lost.

It is reported he was unaware of its contents.

The package contained over 300,000 pounds worth of diamonds — a value of over $20 million today.

Captain Ivan Smirnoff was a surviving pilot of the Dakota. ( Supplied: State Library of Victoria )

Diamond Jack

Days after the Dutch crashed north of Broome, a self described beachcomber named Jack Palmer arrived at the scene.

Wil Thomas is a local tour guide and said this would have been a harrowing experience.

"We were at war and the thinking was that the Japanese were going to land at any minute," he said.

"The smell of death was everywhere and four bodies are buried in a shallow grave.

"Most people would have stayed well away."

But Palmer inspected the wreckage and discovered the diamonds.

'Diamond' Jack Palmer was acquitted after being charged with stealing the diamonds. ( Supplied: National Library of Australia )

There are differing versions of what happened next.

Some accounts said he found just some of the diamonds, put them in salt and pepper shakers and took them to the authorities.

Others say he pocketed most, giving a handful to each of his mates, and handed a fraction of his find to authorities.

Mr Thomas believes one version.

"He definitely did not hand back all of the diamonds," he said.

"I think he assumed the Dutch government didn't know how many diamonds there were … I think he thought they got a coffee scoop and poured it into a bag.

"It's probable the Dutch government knew every stone in that package — but I think he held little comprehension of how much money he held in his hand.

"Legend has it that he swapped 5,000 pounds of diamonds for enough tobacco to roll a cigarette."

Correspondence between Custom House and the Commonwealth Bank discussion the location and value of the diamonds. ( Supplied: Broome Historical Society and Museum )

It is reported that Mr Palmer walked into the office of Crown Prosecutor Major Cliff Gibson, pulled from his pocket a salt and pepper shaker, unscrewed the tops and emptied 20,000 pounds of diamonds onto the table.

Jack Palmer and two others were later charged with stealing diamonds.

But he was acquitted.

"Nobody could believe it, it was blatant that Jack Palmer had the stones," Mr Thomas said.

"But [that's] what I love about the story."

An article from 1943 detailing the diamond drama unfolding in the Kimberley. ( Supplied: Broome Historical Society and Museum )

"The world was at war, there was misery everywhere, so I don't think the magistrate really cared … maybe he wanted a good luck story."

It is not certain how many diamonds Jack Palmer kept for himself, but legend had it that he bought a house and a car, living comfortably after his stint in court.

Where are the diamonds now?

Local legend also said that some of the people in the remote communities of Beagle Bay and Lombadina found at least some of the diamonds but did not know their worth.

Leonie Kelly's father Phillip Cox was one of the first men who found the plane after it crashed, arriving before Diamond Jack.

Leonie Kelly's father did not know the worth of the diamonds on the crashed Dutch plane. ( ABC Kimberley: Emily Jane Smith )

He lived in Beagle Bay, a remote community north of Broome, which had a small army presence during the war.

"He told me they had to wait to low tide because it was in the water," she said.

Ms Kelly said her father and the rescue crew did not recognise the worth of the diamonds.

"Dad was saying they just thought it was coloured stones of no value," she said.

"They had everything they needed in the community, they didn't need diamonds."

But later on in life the family would joke about the story.

"They said 'couldn't we have just held onto one?'" she said.

"But it was not meant to be."

A cross at Carnot Bay stands today, commemorating the four people who lost their lives in the crash. ( Supplied: Monument Australia )

Ms Kelly said there are stories that people buried the diamonds in tobacco tins.

"But when they went back to them they weren't there," she said.

Other rumours about the diamonds have survived decades.

There is a story of a small package that was found in the fork of a tree containing diamonds.

Another that they were in a home and when a handyman left a job incomplete, it is thought he found the diamonds and made off with his fortune.

But Ms Kelly is almost certain the diamonds simply are not in the Kimberley anymore.

"So don't come here for diamonds, they are long gone!" she said.