An Ontario court has granted leave to appeal a decision that allowed claims to proceed against several fund dealers whose reps referred clients to failed hedge fund firm Portus Alternative Asset Management.
The fund dealers sought leave to appeal a decision handed down in June 2007 refusing to strike out investors’ claims for “knowing assistance of breach of fiduciary duty” and “assisting or facilitating breach of contract.”

The claims arose from investments made by investors in Portus Alternative Asset Management Inc. The defendants are mutual fund dealers who referred their own clients to Portus.

The underlying issue in the motion is whether mutual fund dealers or investment advisors owe a duty of care or a fiduciary duty to persons who are not their clients, the court said.

Earlier, the firms brought a motion to strike out the plaintiffs’ claims. And most of those claims, including negligence, breach of fiduciary duty, breach of contract, and others, were either struck out by the motions judge or abandoned during the hearing of the motion. The two claims the motions judge did not strike out form the basis for the appeal and for this motion for leave.

The court found “that there is good reason to doubt the correctness of the decision. I agree with the submission of the [fund dealers] that the claims against the defendants potentially have broad implications for the highly regulated investment industry.” As a result, leave to appeal is granted on both issues.