There are two purposes to a letter of demand. Firstly, it puts the debtor on notice of the intention to commence legal proceedings unless payment is made and gives the debtor one last opportunity to pay.

Don’t be so demanding! Guidelines to letters of demand

Why send a letter of demand?
There are two purposes to a letter of demand. Firstly, it puts the debtor on notice of the intention to commence legal proceedings unless payment is made and gives the debtor one last opportunity to pay. Secondly, the letter of demand may be tendered as evidence during court proceedings as written proof of the debt that is claimed and the initial attempts made to resolve the matter.

What should a letter of demand contain?
In its Annual Report of June 2011, the Victorian Legal Services Commissioner (LSC) published a Fact Sheet entitled “Issues in complaints about debt collection”. The Fact Sheet came about as a result of an increasing number of complaints being made against practitioners who practised in the area of debt collection. The Fact Sheets states “letters of demand should contain clear and accurate information and instructions about the amount owing and the process for paying the debt in order to prevent legal proceedings being issued. Letters should be carefully worded and should not contain threats for the issuing of legal proceedings for unpaid costs, where those costs may not be legally enforceable.”

A letter of demand should also contain copies of any relevant documents such as contracts, written agreements and invoices etc. These documents should be listed and attached to the letter of demand to assist the debtor identifying the transaction and their liability to pay.

How should a letter of demand be sent?
It is advisable to send a letter of demand by registered post or fax to confirm receipt. A copy of the letter of demand should also be retained. Generally speaking, only one letter should be sent and the threat of commencing legal proceedings should be acted on, otherwise, the debtor may simply call the creditor’s bluff.

A letter of demand should not be misleading or intimidating A letter of demand should not contain statements that are calculated to mislead or intimidate the debtor. The LSC has seen instances where practitioners have requested the debtor pay legal costs, even where there is no liability to pay the cost, for example, prior to legal proceedings being commenced.

In ACCC v Sampson [2011] FCA 1165, the Federal Court of Australia held that a Victorian legal practitioner had engaged in misleading conduct by sending out numerous letter and notices to debtors which included requests for the recovery of an outstanding amount “together with $30.00 [or other such amount specified] Solicitor’s costs.” This was because there was no outstanding amount which included $30.00 for solicitor’s costs and the law firm’s clients had no entitlement to recover solicitor’s costs in respect of its debt.

Here, at Dangerfield Exley Lawyers, we have practitioners who specialise in debt recovery and can assist you in the recovery of unpaid monies or contesting a letter of demand. If you wish to have a confidential discussion or would like more information, please contact Steven, Angela or Lynda in our litigation team today on 9863 7621 for so common-sense direction moving forward.

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