The firm said last week that the shareholders have lost millions of dollars after the company's "disastrous" financial performance in the 2010 financial year. 

Shareholders claim that the market should have been warned that Gunns’ financial results for the first half of 2010 were going to be dismal.  

The firm said that Gunns was aware, as at 31 August 2009, that its results would be significantly worse in this reporting period as compared to the first half of the 2009 financial year. "Gunns did not tell the market this, in breach of the company’s continuous disclosure obligations under the Corporations Act," the law firm said. 

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The legal action is funded by IMF (Australia) Ltd and is brought on behalf of shareholders who acquired an interest in Gunns shares during the period 31 August 2009 and 19 February 2010.

Maurice Blackburn senior associate Jason Geisker said: “It was not until the first half results were reported to the market on 22 February 2010 that investors were told that Gunns’ profit was down by over $30 million, being almost 100 per cent lower than the profit reported in the same period in 2009. 

"Investors expect listed companies and their officers to fulfil disclosure obligations and not to mislead the public. 

"The obligation to continuously disclose material information is fundamental to the fair and well informed operation of our financial markets.”

On 31 August 2009 Gunns said that it was optimistic that the "bottom of cycle" had been reached and that although key export markets had declined in the third quarter of 2009 they had stabilised in final quarter of that year.  A $145 million capital raising was also announced that day.  

On 11 November 2009, as a part of the Chairman’s address, Gunns said that although the strength of the Australian dollar had an effect on the operating margins. As reported by Maurice Blackburn, the company said at the time that "it is now evident that markets are accepting this higher Australian dollar and prices are improving for our product”.

However, on 22 February 2010 Gunns reported only $400,000 in net profit after tax (NPAT), down 99 per cent on the 2009 corresponding period, in circumstances where analysts had been forecasting NPAT of around $12.3 million. 

The class action claims that Gunns was aware that its 2010 first half results would be in stark contrast to analyst predictions but the company failed to correct that impression when it should have.

Gunns' share price dropped by 35 per cent after the 2010 first half results announcement, from 88 cents at the commencement of trade on 22 February 2010 to 57 cents by the end of that week.

The lead applicant in the class action is Sydney University PhD student, Sean Foley, who is making the claim on behalf of a range of institutional and retail investors.

Foley bought 12,000 Gunns’ shares on 30 December 2009 yet by 31 May 2010 when he sold his shares they had lost almost half of their value.

“I was surprised to see Gunns’ profit results as there was no warning that the company was in trouble. 

"I have a particular interest in corporate governance as that’s what my study is focussed on, and I recognise that it is difficult for regulatory authorities to recover losses. Private enforcement via class actions provides tangible results for small retail shareholders like myself.

“It is important companies realise that investors will not tolerate a cavalier approach to continuous disclosurethat leaves shareholders unable to make informed decisions about their investments," Foley said.