In a 7-0 decision, the court upheld lower court rulings that said a class suit can proceed against AIC Ltd. and CI Mutual Funds Inc.
The firms were among five fund managers found by the Ontario Securities Commission in 2004 to have allowed market timing practices - quick in-and-out trading of fund units to exploit price discrepancies - which hurt their investors.
Market timing can hurt long-term investors in mutual funds by diluting a fund's assets, raising its costs and potentially forcing the manager to keep extra cash on hand.
Although the firms paid millions in a settlement with the securities regulator, some investors filed a class action suit seeking more money.
A motion judge denied the suit, but that was overturned by other courts and now the Supreme Court has agreed the suit can proceed.
Three of the five firms involved have already settled, leaving the suit to go ahead against AIC and CI.
Writing for the court, Justice Thomas Cromwell said the original judge was wrong to have barred the class action suit.
"I agree with the Divisional Court and the Court of Appeal that the motion judge erred in principle in his analysis and that this justified appellate intervention in his exercise of discretion to refuse certification," Cromwell wrote.
"As I see it, the correct legal principles support those courts’ decision to certify the proposed class action."
CI (TSX:CIX) noted the Supreme Court's decision only allows the class action to proceed.
"CI Investments intends to vigorously defend this action, in part, on the basis that to the extent that our funds' investors suffered any harm, they have been fully compensated as a result of the payments that CI Investments made to them eight years ago as a result of the Ontario Securities Commission proceeding," the fund manager said in a statement.