Developer upgrading Kingsford Smith Drive could face class action from shareholders

The developers handling the $650 million upgrade of a major Brisbane road could face a class action by its shareholders. A legal firm is calling on concerned shareholders to register their interest.

Paul Spottiswood pics of the work on Kingsford Smith Drive. He asks: What has gone wrong that that much reinforcing is needed?

THE developer of the $650 million Kingsford Smith Drive upgrade could face legal action from its own shareholders.

Legal firm Maurice Blackburn Lawyers today called for concerned shareholders to join a proposed class action against the construction giant for breaching the Corporations Act’s “continuous disclosure obligations and engaging in misleading or deceptive conduct”.

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Cost of major road delay revealed

Why Kingsford Smith Dr won’t be finished until late-2020

Kingsford Smith Drive delay annoys locals

‘Design defect’ causes huge KSD delay

A Lendlease spokesman told City North News: “Lendlease notes that no class action proceedings have been filed against the company and we would vigorously defend any such action.”

The company experienced a drop in share price — falling from $17.45 on Nov 8 last year to $12.72 on November 13 to $12.37 yesterday — after revealing issues with its Engineering and Services Business.

Neil Arckless, Project Director of Lendlease, at Darling Square, Sydney. IMAGE: AAP/Flavio Brancaleone)

“On 9 November 2018, LLC announced to the market that it had identified ‘further underperformance’ in its Engineering and Services Business, also announcing that it was reviewing its Engineering and Services Business in light of that underperformance,” the Maurice Blackburn Lawyers statement said.

“The market reacted sharply to the announcements, with Lendlease’s share price dropping by more than 18 per cent in a single day of trading on 9 November 2018.

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“In its half-year results presentation on 25 February 2019, LLC then announced that it considered the Engineering and Services Business was ‘no longer a required part of the Group’s strategy,’ and it expected to incur restructuring costs of between $450 million and $550 million pre-tax as a result of that decision.”

A Lendlease logo is seen on temporary fencing in Sydney's CBD. IMAGE: AAP/Jeremy Piper)

Just a few weeks later, Lendlease embarked on a major communications campaign, after it was revealed that the Kingsford Smith Drive upgrade was to take an extra year because a “design defect” had been discovered. The error will force the project to blow out by at least $47 million, according to an announcement made to the Australian Stock Exchange earlier this year.

Class actions Principal Lawyer at Maurice Blackburn, Rebecca Gilsenan, said “it defies belief that the company would not have had adequate awareness of such significant issues and changes to the business earlier than when it informed the market, ultimately distorting the share price for investors”.

“Shareholders who purchased LLC ordinary shares ultimately paid an inflated price and can seek to recover their losses through our proposed shareholder class action,” Ms Gilsenan said.

“Our proposed action will allege that LLC failed to comply with its continuous disclosure obligations under the Corporations Act 2001 (Cth) and the ASX Listing Rules and engaged in misleading and deceptive conduct in respect of the performance of its Engineering and Services Business.

“Time and again we see large and experienced companies flouting the laws in order to gain some type of advantage and it is ultimately millions of everyday Australian shareholders — whether that be through individual accounts or through savings tied up in major superannuation funds or other managed funds — that end up paying the high price of not being properly informed.

“Corporate conduct is a serious issue at the moment in Australia, and companies must start justifying their worth to society with a greater emphasis on things such as their social impact, rather than just straight economics — that’s what the founder of Lendlease believed in 1973 and today’s company should still heed those words.”

She said shareholders who purchased LLC ordinary shares between 21 February 2018 and 8 November 2018 (inclusive) can participate in recovering some of those losses through the proposed shareholder class action, by registering at www.mauriceblackburn.com.au/lendlease-class-action.