Swish Group: film outfit insolvent since July 2006
by: Alex Prior

Screen Hub
Friday 4 December, 2009

As Swish staggered around in a morass of unpaid bills that stretches from Melbourne to Mumbai and over to Philadelphia, former University of Melbourne Chancellor Ian Renard went in to bat for film crew (including his daughter) at the creditors meetings of the Swish Group. Our frighteningly well-dressed correspondent went undercover to catch the action.

Swish is in voluntary administration, and owes millions to crew and suppliers here and in the US.

At three of the ten creditors meetings held on Wednesday for Swish Group companies (including Swish Films and Swish MG Distribution – organiser of the Indian Film Festival), Mr Renard questioned the administrator, Richard Cauchi of CJL Partners about the company finances, and led a vote to place one of the companies, Swish Films, in liquidation rather than accept a Deed of Company Arrangement. A vote that would have succeeded if the administrator had not voted related-party proxies (read, other companies in the Swish group) in favour of the deed. The companies in the Swish Group had loaned each other money, giving them voting rights as creditors.

The creditors' meetings had been called to pass a Deed of Company arrangement. Under the Deed, Swish would be taken over by web advertising company Planet W and re-listed on the stock exchange, but unsecured creditors (read film crew) would not receive a cent of the money owing to them unless new shares issued by Planet W tripled in value from 1/10 of a cent. Planet W will also pay $450,000, but none of this money will flow to unsecured creditors, the administrator said.

Mr Renard asked why the administrator was not placing the company in liquidation, as that would allow the directors and auditors to be sued to recover the money owing. The administrator replied that “it is an expensive action to attempt to proceed with” and would need either the support of the creditors or ASIC [Australian Securities Investment Commission].”

In an exchange that was brisk on one side and long-winded on the other, Mr Renard pressed his point, asking why, if the administrator believed that “the Group may have traded while insolvent from as early as July 2006”, the administrator was not suing the auditor, Ernst & Young, which had failed to notice that “[the] superannuation guarantee charge remains unpaid since July 2006”?

In a later exchange, the administrator told the meeting that the superannuation had been correctly recorded in the companies books as unpaid.

The Swish Group collapsed while Swish Films was acting as line producer for Inidan studio Dharma Productions on Kurbann leaving both Australian and Philadelphia crew and suppliers unpaid.

Mr Renard asked whether all of the money paid by Dharma to Swish had reached the crew – a question that the administrator referred to former Swish CEO Carey Stynes.

Mr Stynes replied that “accounting in the US was inadequate” which resulted in Swish “short billing” Dharma “by a couple of hundred thousand dollars”. Dharma had refused to pay the money.

“I find it difficult to believe,” Mr Renard said.

CJL Partners' Report to Creditors states that “Each of the Swish Group of companies operated several bank accounts however funds appear to have been drawn from which ever accounts had clear funds at the time to discharge supplier accounts and other trade liabilities of the Swish Group of Companies.”

Screen Hub was later able to confirm from sources that at least one member of Swish's financial staff had been in the US, and several of the Australian crew described production manager Mitu Bhowmick as “fighting like a tiger” to ensure that crew were paid. “She was in an untenable position, I don't think she knew who to believe,” another crew member said.

The initial vote on whether to adopt the Deed of Company Arrangement in the Swish Films creditors meeting was hung three in favour – and three against. Until Richard Cauchi (administrator) exercised his vote as chair.

Mr Renard promptly challenged his right to do so as a related party – a challenge he lost.

In the Swish MG Distribution meeting, the motion was also carried on related party (Swish company) votes, however Achala Datar, holding three crew proxies, defeated the motions to remunerate the administrator. The administrator was unable to vote related-party proxies.

According to the administrator's report, the Swish Group has total secured and unsecured claims outstanding of $9,088,375.

Unless the 100 million shares to be issued by Planet W (at 1/10th of a cent) triple in value by the time the administrator sells them – none of that money is likely to be seen by creditors. Mr Cauchi would not estimate how much would be available if the shares did gain in value.

For those who like legal definitions, Part 5.3A of the Corporations Act, the stated goal of administration is to:

* allow the company to avoid liquidation and to have the company administered in such a way that maximizes the chances of the company and its business continuing; or
* if it can't continue, to allow a better return for the company's creditors and shareholders than would result from the liquidation of the company.

Alex Prior
Alex Prior is the Managing Director of Screen Hub.

news@screenhub.com.au
http://www.screenhub.com.au

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