Adelaide’s premium whisky venture sours

What started as a dream business to make high quality whisky in Adelaide has turned sour, with its founding partners heading to the Supreme Court in a dispute over money, stock and shares.

A claim filed in the court on February 18 details how three Adelaide couples met through their children at Rose Park Primary School in 2004 and discovered a shared passion for whisky.

They took their passion a step further, investing money and time in the creation of Southern Coast Distilling Pty Ltd to make and market a drop that would later be described by an international expert as “one of the most astonishing whiskies it has been my honour to taste”.

The fallout has been dramatic, with one couple locked out of the business and allegations of “dishonest, improper and fraudulent” behaviour along with asset stripping from the core business.

Two of the three couples are now trying to establish a second business to do what the first couldn’t – make a profit from distilling whisky in Adelaide.

Ian and Jacqueline Schmidt along with Victor Orlow and his partner Rosemary Harvey have set up a new company called Tin Shed Distilling and its application for a retail liquor licence was heard in the Licensing Court on Wednesday.

Objecting to the granting of a licence to Tin Shed are Anthony and Christine Fitzgerald, who have separately filed a claim in the Supreme Court seeking damages and orders after what they said was a set of actions to freeze them out.

The statement of claim outlines how a small group of friends agreed to devote their spare time and around $30,000 each to build and operate a distillery at Welland.

Distillation started in January 2005 with a small 80 litre still and later a bigger 600 litre still, handmade by the trio.

It was agreed between the group that directors’ loans to the company would not be repaid until the business was profitable and labour would be provided by the three men on a “voluntary and equitable basis”.

“Until mid-2012 all returns and revenues were reinvested in the business,” the documents state.

By then, the whisky was making its mark on the bottle shop shelves and even attracted praise from the international home of the spirit, Scotland.

International judge Jim Murray — who writes for The Whisky Bible — said the Southern Coast drop was so good that it “brought me to my knees”.

Scotland’s The Sun newspaper ran a feature story on the rise and rise of Southern Coast, selling in the UK for between 75 and 135 euros.

Ian Schmidt told the paper that there was more to come.

“One night me and my friends thought it might be fun to try and make our own whisky,” he told the paper.

“We experimented and discovered we could make a pretty nice brew.

“So you Scots have been kidding the world on for all these years.

“Making whisky is actually really easy.”

Schmidt predicted that Southern Coast would one day become a whisky powerhouse.

“My aim is to eventually flog our whisky to the Scots in Scotland.

“That would be like selling sand to the Arabs.”

While he was pitching to the Scots, there were problems afoot back in Adelaide.

In February 2012 there was a meeting at the Fitzgeralds’ house in Frewville.

“The Schmidts were unhappy and more money was needed,” the court documents state.

The partners had agreed the business wasn’t viable in its current location.

There were more meetings and emails flowed between the group members.

The Orlows and the Schmidts wanted the Fitzgeralds out; for their part, the Fitzgeralds offered to buy out the other two families.

That’s where it took another twist.

Production had been dormant for some time and the stills were fired up again in August 2012, just as Ian Schmidt emailed Fitzgerald to advise there had been an “irretrievable breakdown of the relationship between directors”.

Fitzgerald sent his accountant in to examine the books and settle on a value for each partner’s share.

The accountant, Andrew Illman had “noted several large transactions,” the documents state.

Money had been paid to the Schmidts for rent of their business premises where the distillery was set up, payments to other directors and shareholders for wages and the company’s stock of unmatured whisky had found its way to another company, Tin Shed Distillery Pty Ltd, a company described by Fitzgerald as a “phoenix”. (A phoenix company is commonly defined as an entity which rises from the ashes of another after insolvency.)

Southern Coast Distillery ceased trading on December 21, 2012, and its assets were sold to Tin Shed.

Tin Shed’s application for a retail liquor licence was overshadowed last month when the Fitzgeralds asked the court to delay proceedings until after the civil claim for damages and orders in the Supreme Court had been finalised.

The Licensing Court declined and the licence hearing resumed Wednesday, March 5, with Tin Shed being granted an interim licence subject to the other dispute’s outcome.

Ian Schmidt, meanwhile, remains hopeful.

“It all turned ugly and it’s now in the hands of lawyers,” he reflected yesterday.

“But the whisky trade in Australia still has a lot going for it.

“For us it’s been a question of economies of scale, not quality.

“We’re looking for investors in a concept we call whisky futures where you buy a barrel of unmatured whisky and then you sell it back to us later.

“It should get some interest.”

Ten years after the dream began, friendships have been fractured, money lost and Adelaide’s place on the international whisky landscape remains fleeting.

This article first appeared on InDaily.