Fortescue Metals Group (ASX: FMG) today denied claims it breached a funding agreement with a New York hedge fund that owns 8 per cent of the iron ore miner.

''Fortescue denies all the allegations made by Leucadia National Corporation in its writ,'' the Australian miner said this morning.

''Fortescue has raised the prospect of issuing further notes, but has not taken any step to do so".

The miner also said future funding was not dependent on the outcome of any legal process.

Leucadia filed a writ of summons against Fortescue and its chief executive Andrew Forrest in the Supreme Court of Western Australia, to protect a $US100 million ($110 million) subordinated note it has held since 2006.

Leucadia said in the filing that Fortescue had said it plans to raise cash through another subordinated note issue and the miner did not have such rights under their agreement.

It is believed a deal between Leucadia and Fortescue allows the former to earn 4 per cent of revenue after royalties from the FMG's Cloud Break and Christmas Creek iron ore mines until 2019.

The money is interest payment on a $US100 million subordinated loan note made to FMG in 2006.

Fortescue, however, has interpreted the 4 per cent interest payment would be given to all noteholders, not just Leucadia.

Therefore, if the iron ore miner issued more notes, the 4 per cent payment to Leucadia would be watered down and the hedge fund would lose out. This also means that in the event that FMG could raise such funds, it would be able to raise capital without any extra interest.

The writ of summons against both the Fortescue and Mr Forrest was issued in the Western Australia Supreme Court, of which Fortescue responded in a statement that the claim for damages was misconceived, as no new notes had yet been issued.

''If Leucadia considered Fortescue was not entitled to issue further notes, it should have explained to Fortescue its interpretation of the note deed poll and subscription agreement,'' the miner said.

Fortescue stocks were trading 1 cent lower at $4.88.