Leighton Holdings faces a class action from investors who allege the construction giant breached continuous disclosure laws.

National law firm Maurice Blackburn said Thursday it will commence a class action against Leighton following a series of profit downgrades and concerns that the company failed to disclose to investors the problems it faced on key infrastructure projects.

On 14 February 2011, Leighton announced an estimated full-year profit of $480 million. Then on 11 April this had turned into a $427 million loss. As a result, Leighton’s share price dropped 14 percent from a close of $28.94 on 8 April 2011 to $24.93 when trading commenced after the 11 April announcement. Leighton pinpointed three matters as the source of its problems: the Brisbane Airport Link, the Victorian Desalination Plant and Al Habtoor Leighton Group.

Andrew Watson, principal and head of the class actions department at Maurice Blackburn, said Leighton breached the continuous disclosure provisions of the Corporations Act in failing to inform investors regarding the material cost increases and delays on Airport Link and the Desalination Project, and the need for further writedowns on Al Habtoor Leighton Group before April 2011.

"We will allege that by 2 November 2010 and certainly by 14 February 2011 Leighton should have told the market of the need for these massive writedowns," he said. “Shareholders expect a company like Leighton to have proper risk management and internal reporting systems to ensure timely announcements are made when there are difficulties.

“The Brisbane Airport Link has been subjected to a dramatically revised profit forecast to a pre tax loss of $470 million. Various factors were blamed for this, ‘design, access, weather, engineering, planning and coordination difficulties.’

“Our investigations have confirmed that as early as April 2009 Leighton was seeking approval for design changes because adverse geological conditions were causing unexpected delays and cost overruns for tunneling works in the Airport Link project.

"With respect to the Victorian Desalination Plant, Leighton had on five separate occasions between November 2010 and March 2011 advised the market that the project was on time and on schedule for delivery of first water by the end of 2011."

Watson added: “It is difficult to understand how Leighton can justify these statements in light of its sudden announcement on 11 April 2011 that the project was suffering serious delays and costs overruns. In addition to the problems with Australian infrastructure projects, Leighton International revealed difficulties with the Dubai based construction company Al Habtoor Leighton Group.

"Leighton International owns a 45 per cent share of the company and twice in 2011 it announced write-downs totalling $619 million in the book value of its investment due to ‘deteriorating cashflow from legacy projects.'"

Maurice Blackburn last settled year settled a major shareholder class action against Multiplex, another construction company, for $110 million. This case was also based on the construction company’s failure to disclose cost over-runs and profit downgrades on major infrastructure projects. Litigation funder International Litigation Funding Partners Pte Ltd (who also funded the Multiplex action) is funding the Leighton class action.