In a landmark decision last month, the Ontario Superior Court of Justice ruled that certain investors who bought into funds offered by Bridging Finance Inc. can get their money back before other investors thanks to investor protections contained in securities law.

That ruling is now being appealed by the court-appointed lawyers for most of the investors in the Bridging funds.

Under last month’s ruling, investors who purchased fund units within 180 days of the firm being placed into receivership, based on offering documents that contained alleged misrepresentations, are entitled to get their original investment back first.

According to court filings, the consequence of that decision is that investors who purchased units outside of the 180-day period would receive just 26%–35% of their money back ($498.6 million–$658.6 million), instead of 34%–41% ($701 million–$861 million).

The appeal asks that all investors be treated equally as part of the ongoing receivership.

The lawyers making the appeal contended that the ruling contained a number of errors. Among other things, they argued the decision mistakenly found that a provision of securities law creates a “de facto” priority over the basic principle of insolvency law that investors should be treated equally.

“The motion judge created an untenable distinction between an insolvent entity in a receivership under the Ontario Securities Act, in which he purported to apply a new set of rules, and insolvent entities in receiverships under other statutes and/or federal insolvency statutes,” the lawyers argued — adding that this effectively created a new category of secured creditors.

The decision also is being appealed by lawyers for another subset of investors in the Bridging funds: investors who sought to redeem their funds, but didn’t get their redemptions processed before the firm was placed into receivership. This represents another $218.8 million worth of units in the Bridging funds.

In the decision, the judge determined that investors with unfulfilled redemption requests shouldn’t get priority. In this appeal, lawyers requested that either the order should be replaced with one that does give those investors priority, or the issue should be returned to the Superior Court to be reconsidered.

These lawyers also argued the original ruling contained several errors, including that it failed to properly consider the contractual provisions covering redemptions, among other issues.