A three-man bench led by Mohd Zawawi Salleh, in allowing the family’s appeal, said there were triable issues to be decided by the High Court.
Other members of the bench were Vernon Ong Lam Kiat and Ahmadi Asnawi.
Last year, Shah Alam High Court judge Ahmad Nasfy Yasin, in allowing Putrajaya to be excluded in the suit, said the plaintiffs had no reasonable cause of action.
The government, in its affidavit, had said the plaintiffs failed to plead that it was vicariously liable for the action of two policemen, Sirul Azhar Umar and Azilah Hadri, who were convicted for Altantuya’s murder.
“The bench has now reinstated the government as party to the suit and a trial will be held in the High Court in May,” lawyer Sangeet Kaur Deo told reporters.
The government can appeal against today’s decision to the Federal Court.
The suit, brought by Altantuya’s father Shaaribuu Setev, his wife Altantsetseg Sanjaa and two grandchildren, named Sirul, Azilah, political analyst Abdul Razak Baginda and the government as defendants.
The family alleges conspiracy in Altantuya’s murder and is seeking damages, including dependency claims.
The hearing of the suit was postponed pending the disposal of the murder case.
Sirul and Azilah were convicted by the High Court in 2009 of killing Altantuya, who was said to be an interpreter and a model.
They succeeded in overturning their conviction at the Court of Appeal in 2013 but the Federal Court in early 2015 restored their conviction and sentenced the duo to death.
Sirul fled to Australia before the final decision. The Federal Court later issued a warrant of arrest for him.
Razak, who was charged with abetment in the murder, was freed at the end of the prosecution’s case.
The court ruled the charge against him was not proven and the government did not appeal, a move that invited severe public condemnation.
Sirul, who is currently held at an Australian detention centre, and Azilah, who is on death row at Kajang prison, did not challenge the suit.
Both their lawyers have discharged themselves in this civil claim while Razak has engaged a counsel to contest the suit.