1.Preheat oven to 180°C/350°F.
2.Peel onions, leaving root ends intact.
3.Coat lamb in flour; shake off excess. Heat oil in large flameproof casserole dish; cook lamb, in batches, until browned. Remove from dish.
4.Melt butter in same dish; cook onions, bacon, mushrooms and garlic, stirring, until vegetables are browned lightly.
5.Return lamb to dish with wine, stock, the water, paste, bay leaves and sugar; bring to the boil. Cover dish; transfer to oven. Cook 1½ hours. Uncover; cook about 30 minutes or until lamb is tender and sauce thickens slightly.
6.Divide lamb among serving bowls; drizzle with sauce.