The Administrative Appeals Tribunal (AAT) has upheld Screen Australia’s decision to slash a $30 million-plus Producer Offset claim for expenditure on the film Occupation: Rainfall by about two-thirds.
The film – a follow-up to the 2018 sci-fi film Occupation which became popular on Netflix – was to be Australia’s version of a Hollywood studio blockbuster. It starred Australian actor Dan Ewing (Love and Monsters), as well as Temuera Morrison (Aquaman) and Ken Jeong (The Hangover).
But the Quirky Mama production, which began in March 2018, hit several hurdles, pushing the initial $12.15 million budget to more than $30 million. The following story is a detailed account of what happened based on the AAT decision, including evidence given by the key parties.
In a lengthy ruling handed down late last year, AAT deputy president Bernard J McCabe likened the production to Francis Ford Coppola’s similarly troubled Apocalypse Now.
The production was interrupted by industrial disputation, the onset of Covid, and financial difficulties. Important changes were made during the production process that blew out the budget. The film enjoyed limited success at the box office when it was released in September 2021.
Quirky Mama, the financiers and contractors were hopeful of recovering some of the costs of the film by accessing a tax offset.
AAT deputy president Bernard J McCabe
Screen Australia raised several issues with the production’s Producer Offset final certificate including the fees paid to producers Carly Sparke and Carmel Imrie of production company Quirky Mama; the fees to writer-director Luke Sparke; and the fees paid to VFX provider Green Smoke Digital.
The VFX work accounted for the bulk of the reduced Producer Offset payout, with the screen agency ultimately ruling that only $9.92 million (originally $10.12 million) counted as qualifying Australian production expenditure (QAPE) rather than the $30 million-plus originally claimed.
It was that rejection that prompted the filmmakers to appeal via the AAT.
Screen Australia had initially approved the film’s Producer Offset provisional certificate in May 2018 based on Quirky Mama’s estimated $11.83 million QAPE.
The filmmakers planned to shoot the movie as much as possible on a physical set using on-set props and costumes, with the initial Block One shoot proceeding as planned, according to evidence at the AAT.
But public criticism by the union over an industrial dispute regarding wages had consequences, according to evidence from producer and Quirky Mama director Carly Sparke (she married Occupation: Rainfall writer-director Luke Sparke in March 2021 – her mother Carmel Imrie was also a producer on the film and a Quirky Mama director).
The (union’s) publications (of the criticisms) caused Quirky Mama Productions to lose funding it had secured from… a company which provides funding for films, either upfront or through pre-sales or gap financing…, which would have been sufficient to cover the expenses of Block Two and Block Three of filming of the film, from about 10 November 2018. Due to (the financier’s) withdrawal of funding:
(a) Quirky Mama Productions was not in a position to commence Block Two of filming;
(b) Cast and crew left the production;
(c) there was a significant hiatus in filming, causing the sets constructed for the purposes of Block Two to be dismantled;
(d) Quirky Mama Productions had to find alternate funding to finish the Film;
(e) Block Two was filmed in November 2019, as opposed to November 2018.
Carly Sparke – AAT evidence
With the film on hold from November 2018, the film’s executive assistant, Alex Becconsall, was approached about the possibility of launching his own VFX company to complete Occupation: Rainfall‘s visual effects.
While he did not have a track record in the VFX industry, he said the producers were unhappy with the VFX service from other providers. This was an opportunity to start his own VFX business, putting him in a position to “drive the creative vision for the film”, while helping the production team.
AAT deputy president McCabe said Becconsall was an “unlikely choice” to lead the VFX component of the production, given his previous experience working in costume, wardrobe and art departments across a number of films.
In cross-examination, he confirmed he had worked with Mr Sparke, the director, as early as 2006 when both were credited as costume assistants on the film ‘The Battle of Long Tan’. He agreed he had worked full-time in the industry from 2014. In particular, he worked on other projects involving Mr Sparke and members of Mr Sparke’s family since 2015, including a credited role on ‘Occupation’.
Mr Becconsall confirmed he had been a producer with a company called Sparke Films – a production company operated by Mr Sparke – between 2015 and 2017… While Mr Becconsall had a lengthy history of working with Mr Sparke and the principals of Quirky Mama, he did not have a track record working in VFX before he was approached to consider overseeing the VFX on ‘Occupation: Rainfall’ in 2018.
AAT deputy president Bernard J McCabe
An agreement was signed with Becconsall’s newly incorporated company, Green Smoke, in April 2019. The VFX would be supplied in post-production, with the exact VFX requirements (and fee structure) determined once the scope of the work became clearer. (Quirky Mama also sought indicative quotes to compare Green Smoke to other VFX suppliers).
However, Occupation: Rainfall‘s financing difficulties changed the planned shoot, with Block Three cut entirely and Block Two shortened, according to Becconsall.
Quirky Mama productions couldn’t afford sets, locations or costumes for block two of filming, so together with Luke, Carmel and Carly, it was decided that we would film as much as we could in Block Two and whatever couldn’t be filmed would be done via green screen after filming. This increased not only the number of shots in the film but significantly altered the complexity of the existing shots and meant the film would be heavily reliant on VFX.
Alex Becconsall – AAT evidence
Writer-director Luke Sparke said using physical sets in block one cost approximately $6 million over a three-week shoot compared to just $1 million with the new approach on Block Two.
Becconsall had estimated it would cost $1.9 million to provide 1045 VFX shots. One month into the Block Two shoot (Becconsall was also now the film’s assistant director as well as VFX co-producer), he was told Quirky Mama couldn’t afford to pay all of the VFX fees up-front – Green Smoke would need to re-invest its fee into the production budget in order to be paid later.
Once the shoot was completed at the end of 2019, he realised his initial $1.9 million estimate would likely be inadequate. He revised the VFX estimate to around $10 million.
A new payment agreement was signed in January 2020 confirming 1400-1500 VFX shots costing a minimum of $15 million-plus, with Green Smoke reinvesting all costs and taking “first position over any rebates, sales and subsequent monies made by the production until the debt is repaid”. Green Smoke would still receive minimal ongoing payments to cover VFX supervision.
“I wasn’t in a position to work for free”.
Alex Becconsall – AAT evidence
Green Smoke needed to rely on a wide range of VFX subcontractors to do the work with the full requirements only becoming clear once editing the film was completed in March or April 2020, Becconsall said. The downturn caused by the Covid-19 pandemic meant many subcontractors were willing to work on a deferred payment basis.
In light of the payment agreement between Green Smoke Digital and Quirky Mama Productions, Green Smoke Digital notified the Green Smoke Digital subcontractors that they would not be paid until the film was completed and monies were receipted by Green Smoke Digital from the Producer Offset from Screen Australia and/or sales revenue generated by the film.
Alex Becconsall – AAT evidence
Quirky Mama continued to experience financial difficulties and in August 2020, SV Partners was appointed as administrator.
SV Partners associate director Brooke Darlington found the film was still uncompleted but the most likely way to secure any return for the creditors in the short term was to release Occupation: Rainfall at a film festival in October 2020 to trigger the Producer Offset. However, this plan also relied on Green Smoke completing the VFX work (or Quirky Mama finding another VFX provider), and the administrators did not have the funds to pay for VFX upfront.
On September 22, 2020, Green Smoke gave the administrator an updated VFX estimate of costs and said there were more than 350 people working on the film. The administrator confirmed that Green Smoke was an unsecured creditor and had no rights to, or interest in the film.
By the end of October 2020, Green Smoke said its VFX work had now cost $20.23 million (exclusive of GST) with $15.23 million performed by subcontractors. The largest single subcontractor was Creative Cupids, which had performed $11.62 million of work.
Occupation: Rainfall had its world premiere at the 2020 Monster Fest in October 2020. However, Creative Cupids’ Nandakumar Payan remained concerned about being paid, telling writer-director Luke Sparke that invoices were past their due date. On November 2, 2020, Luke Sparke replied to Nandakumar Payan via email:
As for the money part – there is no budget until our tax rebate and sales comes in. I believe this is in your contract you signed with Green Smoke and what ever other vendor has also done. We won’t get our millions until it’s complete. We can submit to Screen Australia now the screening is done, but that will take weeks and be after the final delivery. I want a closer to finished version for the American Film Market next week, but now they wont be able to show this temp one I don’t think. So they will screen it once we delivery the final.
But we are only working with small amounts of money now and you, me, Green Smoke, producers, Toby, all other vendors can’t get paid until we deliver. And I know you have expended your own cash, which is amazing, but we all have to see this through so we can get paid ASAP.
Luke Sparke – email to Nandakumar Payan of Creative Cupids Pty Ltd. November 2, 2020. – AAT evidence.
Green Smoke continued to work without a confirmed agreement from the administrators to pay them and agreed to defer payment until after the film was complete.
The filmmakers lodged an application for the Producer Offset final certificate on March 25, 2021, which prompted Screen Australia to question several QAPE components, including a significant portion of the VFX expenses.
The AAT found that the expenditure was not “incurred” in the relevant period because the contractual payment was subject to a contingency – there “arguably cannot be a claim for expenditure to be included in QAPE if that expenditure is to be funded out of QAPE”.
Screen Australia also raised issues that some of the VFX work was performed offshore and an “escalated” or “ballooned” $4.909 million ($5.4 million inclusive of GST) invoice that Creative Cupid sent to Green Smoke, was “apparently included to support and perhaps enhance the claim by Creative Cupids for a separate tax offset”.
There is no doubt the $4.909 million amount claimed by Creative Cupids would not have been passed on to Quirky Mama if Green Smoke and Quirky Mama were dealing at arm’s length.
AAT deputy president Bernard J McCabe
Screen Australia also questioned the $350,000 producer fees contracted to be paid to Carly Sparke and Carmel Imrie. The contract required $220,000 to be reinvested and guaranteed to be paid back from the Producer Offset in a priority position or, if not enough to cover the fee, from other sales until paid in full. The AAT said the word ‘reinvest’ was being asked “to do too much work when one has regard to the terms of the agreement”.
I acknowledge that interpretation contains within it a catch worthy of Catch-22. How would Quirky Mama be able to claim it incurred QAPE in respect of the amounts payable to producers if those amounts were not incurred until after QAPE was determined? Indeed, why would Quirky Mama and the producers have agreed to such a clause if that was its intended effect?
AAT deputy president Bernard J McCabe
Writer-director Luke Sparke was contracted in March 2018 to receive total compensation of $825,000, as well as “a 12 per cent share in the production company formed to make the film, and also the same percentage of any back end or net producer profit realized in perpetuity in all territories.”
In August 2020, he also signed a re-investment agreement ($425,000) with similar terms as the producers. The AAT found this expenditure was also not “incurred”.
IF contacted the Occupation: Rainfall filmmaking team to ask if they disputed any parts of the AAT evidence and if anyone who worked on the production was left unpaid.
Carly Sparke said: “We were extremely disappointed with the decision after taking it all the way to a final hearing in the AAT. As local filmmakers, we rely on the QAPE.”
Contact IF editor Brendan Swift at bswift@if.com.au.