Polson said it had emerged in the past week that there was a financial discrepancy "well into six figures" that would not allow the festival to proceed. Last year's Tropfest in Centennial Park. Credit:James Alcock He has started legal action against a company he declined to name that has been managing the event for Tropfest, saying it was hard to avoid concluding there had been "a terrible and irresponsible mismanagement" of the festival's funds. "Suddenly, wham, we've got this huge hole," Polson said from New York, where he is executive producer of the television series Elementary. "I'm not suggesting there's any impropriety here," he said. "I honestly don't know. The best I can say now is mismanagement.

"It's hard to avoid 'mismanagement' if you're not even getting straight answers about what the situation is." Tropfest founder John Polson. Credit:Belinda Rolland Photography Polson said he was unsure what the festival's future was now. "Can it come back? I honestly don't know," he said. Polson described himself as feeling numb about developments in recent days.

"It's like being in a bad dream," he said. "This is 23 years of work. It's a stunning, shocking blow, with really no hint of what was to come." More than 450 filmmakers entered shorts this year and the finalists had been called ahead of an announcement next week. Hollywood star Susan Sarandon had agreed to head the festival jury. "I feel terrible for the filmmakers," Polson said. "I feel terrible for the audiences. "It's terrible for the sponsors. And I think it's terrible for anybody who cares about Australian film and certainly the grassroots, emerging end of Australian film because, right now, our future is up in the air. I really don't know what's going to happen."

Polson said the business model for the festival in the past decade was that Tropfest owned the intellectual property - "the creative control of the festival is with me" - while contracting a company to raise the funding and administer the event. "It's worked very well," he said. "I've done a lot of soul-searching. Did we do something wrong? Did I miss some signs? "But the truth is this system has worked very well in different forms with different organisations for 23 years." The hugely successful festival began when Polson organised short film screenings at Sydney's Tropicana cafe in 1993. It expanded quickly to free events attended by vast crowds in The Domain then Centennial Park, with shorts entered by then rising filmmakers such as Joel and Nash Edgerton, Paul Fenech, Clayton Jacobson and Rowan Woods.

Judges at Tropfest have included Nicole Kidman, Cate Blanchett, Russell Crowe, Geoffrey Rush, Baz Luhrmann, George Miller, Keanu Reeves, Samuel L. Jackson, John Woo and Ewan McGregor. As well as adding a junior event, Tropfest expanded to festivals in North America, the Middle East, New Zealand and South-east Asia. Polson said the cancellation of the Australian event was "not good" for the international festivals. "This is about the Tropfest brand being vulnerable but my main concern has always been Australia. That's where it started. That's where it's biggest ... "Of course, I want those to exist but I almost don't want them to continue without Australia because it's like the tail wagging the dog. It's such an Australian event."