Can legal fees be claimed as special damages? In the recent Federal Court ruling in Golden Star & Ors v Ling Peek Hoe & Anor and another appeal [2024] MLJU 909, the court addressed whether expenses such as litigation costs, legal charges, and fees qualify as special damages in proceedings involving similar parties.

Background Facts

The appeal before the Federal Court arose from a protracted legal dispute spanning over 17 years. On November 28, 2012, the High Court initially ruled in favor of the Respondents (“Original Order”). However, on March 13, 2015, the Court of Appeal overturned this decision, only for the Federal Court to reinstate it on June 20, 2017. Despite this, the issue persisted. The Original Order stipulated that general, special, punitive, and exemplary damages were to be assessed by the Registrar, with costs to be taxed by the same. During the damages assessment, the Respondents claimed legal fees amounting to RM 2,918,000.00. The High Court allowed this assessment, a decision upheld by the Court of Appeal, prompting the appeal to the Federal Court.

Salient Findings of the Federal Court

The Federal Court allowed the appeal and overturned the award of legal fees for the following reasons:

  1. Legal fees fall within the definition of costs under O. 59 r. 1 of the Rules of Court 2012 and are subject to the discretion of the court[1];
  2. Damages are compensatory and aim to indemnify for loss due to a civil wrong, requiring proof by the claimant. Thus, legal fees are distinct and should not be conflated with damages, which are assessed under different principles. Allowing legal costs to be claimed as damages would contradict the established regime on costs and the discretionary power of the court[2];
  3. Costs regime has been elaborately designed in O. 59 of the Rules of Court to govern and regulate the recovery of costs. Claiming legal costs on full indemnity basis is an exception and not a norm wherein claims for extra legal costs or full indemnity legal costs other than the costs awarded by the Court is disallowed as a matter of social policy to bring down litigation costs, encouraging finality in litigation and enhance access to justice[3];
  4. The Original Order provided for costs to be taxed if parties failed to agree. Therefore, it is not open for the Respondents to claim for the legal costs by way of assessment of damages[4];
  5. The High Court lacks the authority to award the legal costs as damages, as these costs also include expenses from the Court of Appeal and the Federal Court. The High Court’s power to award costs is governed by Section 25(2) of the Courts of Judicature Act 1964, which does not extend to proceedings beyond its jurisdiction[5];
  6. Regarding costs on an indemnity basis, the High Court cannot assess costs on this basis without a specific court order, which was absent in the Original Order[6].



The Federal Court’s decision effectively defines and clarifies the position on the recoverability of legal costs. Our legal system has been designed for the recovery of legal costs to be within the discretion of the court and within the rules in O. 59 as opposed to damages which is compensatory in nature. This distinction is necessary as both costs and damages involved different power the Court in assessing of the award and transcended into the issue of jurisdiction.

Further, it is to our observation that the Federal Court’s decision has effectively overrule the principle in Yap Boon Hwa v Kee Wah Soong [2020] 1 MLJ 37, where the Court of Appeal has expressly awarded damages in the form of legal fees incurred by the defendant for defending an action of fraudulent misrepresentation were allowed[7]. Despite this, the Federal Court did not signify whether Yap Boon Hwa is still a good precedent and merely state that “Neither Yap Boon Hwa nor Smiths authority for the proposition that costs in the proceedings which are otherwise only recoverable through the costs regime and subject to the discretion of the Court, are recoverable as damages. There were no claims for legal fees, charges or costs, whether in the original action or any subsequent action.”

However, the Federal Court’s decision does not prohibit the recoverability of legal costs by the winning party from the losing one. The concept of costs on an indemnity basis remains effective and within the discretion of the Court, as it falls within the costs regime pursuant to O. 59 of the Rules of Court 2012.

Regarding costs on an indemnity basis, a specific court order must be made for it to be assessed as such. Despite its name, there is no certainty that costs on an indemnity basis will match the legal fees paid to the lawyers, as the court retains discretion to determine the reasonableness of the amount. Guideline for the basis on awarding costs on an indemnity basis may be referred in Fiona Trust & Holding Corporate and ors v Yuri Ptivalov and ors [2011] EWHC 664 (Comm), where Justice Andrew Smith at identified the following guiding principles:

  1. The court should have regard to all the circumstances of the case and the discretion to award indemnity costs is extremely wide.
  2. The critical requirement before an indemnity order can be made in the successful defendant’s favour is that there must be some conduct or some circumstance which takes the case out of the norm.
  3. Insofar as the conduct of the unsuccessful claimant is relied on as a ground for ordering indemnity costs, the test is not conduct attracting moral condemnation, which is an a fortiori ground, but rather unreasonableness.
  4. The court can and should have regard to the conduct of an unsuccessful claimant during the proceedings, both before and during the trial, as well as whether it was reasonable for the claimant to raise and pursue particular allegations and the manner in which the claimant pursued its case and its allegations.
  5. Where a claim is speculative, weak, opportunistic or thin, a claimant who chooses to pursue it is taking a high risk and can expect to pay indemnity costs if it fails.
  6. A fortiori, where the claim includes allegation of dishonesty, let alone allegations of conduct meriting an award to the claimant of exemplary damages, and those allegations are pursued aggressively inter alia by hostile cross-examination.
  7. Where the unsuccessful allegations are the subject of extensive publicity, especially where it has been courted by the unsuccessful claimant, that is a further ground.
  8. The following circumstances take a case out of the norm and justify an order for indemnity costs, particularly when taken in combination with the fact that a defendant has discontinued only at a very late stage in proceedings:

a) Where the claimant advances and aggressively pursues serious and wide ranging allegations of dishonesty or impropriety over an extended period of time;

b) Where the claimant advances and aggressively pursues such allegations, despite the lack of any foundation in the documentary evidence for those allegations, and maintains the allegations, without apology, to the bitter end;

c) Where the claimant actively seeks to court publicity for its serious allegations both before and during the trial in the international, and national and local media;

d) Where the claimant, by its conduct, turns a case into an unprecedented factual enquiry by the pursuit of an unjustified case;

e) Where the claimant pursues a claim which is, to put it most charitably, thin and, in some respects, far-fetched;

f) Where the claimant pursues a claim which is irreconcilable with the contemporaneous documents;

g) Where a claimant commences and pursues large-scale and expensive litigation in circumstances calculated to exert commercial pressure on a defendant, and during the course of the trial of the action, the claimant resorts to advancing a constantly changing case in order to justify the allegations which it has made, only then to suffer a resounding defeat.”

Further, the Federal Court’s decision in Takako Sakao (f) v Ng Pek Yuen (f) & Anor (No 2) [2010] 2 MLJ 181 is apt and instructive. Gopal Sri Ram FCJ (as his Lordship then was) referred to the guideline provided by Millett J (later Lord Millett) in Macmillan Inc v Bishopsgate Investment Trust plc and others (No 3) [1995] 3 All ER 747:

“The power to order taxation on an indemnity basis is not confined to cases brought with an ulterior motive or for an improper purpose. Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win. Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.

Therefore, it can be concluded that legal costs are awarded based on O. 59 of the Rules of Court 2012 on the basis of assessment laid down in O. 59 r. 16 in which it is still within the discretion of the Court and not to be claimed as damages.


  1. Azrul Haziq Khirullah


[1] See para 25-26 of Golden Star & Ors v Ling Peek Hoe & Anor and another appeal [2024] MLJU 909 (“Judgment”)

[2] See para 33 and 54 of the Judgment

[3] See para 45 of the Judgment

[4] See para 27 and 28 of the Judgment

[5] See para 22 and 23 of the Judgment

[6] See para 30 of the Judgment

[7] See para 79 of Yap Boon Hwa v Kee Wah Soong [2020] 1 MLJ 37