Sotheby's last night cancelled the sale of a historic pair of portrait busts after a protest by Tasmanian Aborigines.

The sale was pulled just hours before the auction was due to begin in Melbourne, Australia.

Woureddy, An Aboriginal Chief of Van Diemen's Land and Trucaninny, Wife of Woureddy by the English artist Benjamin Law were expected to set a record price for sculpture in Australia.

Each had a pre-sale estimates of between $500,000 and $700,000.

The pieces are among two of the earliest formal sculptures made in Australia, and were part of a sale of items from the collection of publishing magnate James Fairfax.

Protesters objected to use of images of their ancestors for commercial gain.

"It's pretty crass," Hetti Perkins, senior curator of Aboriginal and Torres Strait Islander art at the Art Gallery of NSW, told news website The Australian.

"The descendants of the people represented in these rare and significant artworks are concerned about the representations of their ancestors being auctioned to the highest bidder."

After the withdrawal, Sotheby's issued a statement reinforcing its respect for Aboriginal culture.

Sotheby's managing director Lesley Alway has reportedly said that he wishes to protect the auction house's Aboriginal arts business.

Tasmanian Aboriginal activist Michael Mansell praised Sotheby's decision to withdraw the items.

But he added: "We couldn't get an assurance that the busts would not be sold behind the scenes. If you make a sculpture of the dead, the spirit of those people can be captured."

Two activists with the Tasmanian Aboriginal Centre, of which Mr Mansell is the legal director, attended the Sotheby's auction in Melbourne last night seeking custody of the busts.

The busts are among the few remaining from 30 original sets. The other known pairs are in institutions, including the National Gallery of Australia and the Tasmanian Museum and Art Gallery.

Last night's Sotheby's auction otherwise went ahead.

It featured 150 artworks, including paintings by Jeffrey Smart, Sidney Nolan, Arthur Boyd and S.T. Gill from James Fairfax's collection.

Smart's The Painted Factory, Tuscany, sold for $870,000 - the night's top price and nearly an auction record for the artist.

However, total sales at $5.7million were less than Sotheby's had predicted, despite the high 70% clearance rate.