Received A Letter of Demand? Here’s What You Should Know - Malaysia

Say you receive a Letter of Demand from a law firm stating the following:

TAKE NOTICE that our client has instructed us to demand, which we hereby do, that you pay to us as solicitors for our Client the sum of RM270,000.00 being the sum owed within SEVEN (7) DAYS from the date hereof, failing which we have strict instructions to commence legal proceedings against you without further notice to you. TAKE FURTHER NOTICE that should legal proceedings be commenced as aforesaid, you shall be liable for the costs of the same.

What do you do?

What is a Letter of Demand?

A Letter of Demand (or an LOD as it is widely known in the legal fraternity) is essentially a letter that is sent to a potential defendant demanding for a certain remedy to be done as per the plaintiff’s request. Depending on the type of the claim, the said remedy can range from payment of a sum of money (for debt related matters) to seeking for an action to be done (i.e. an apology for defamation related matters).

It is a common misconception that once you receive a letter of demand that means there is a legal suit against you in Court.

A letter of demand is actually issued to potential defendants prior to the filing of a legal action. The purpose of issuing a letter of demand is to, as much as possible, try and settle the dispute between parties without the need of a lengthy and costly Court battle.

In certain disputes, the issuance of a letter of demand can be a prerequisite before filing a suit in Court. Such requirements would be provided for in the contract or agreement and failure of issuing a letter of demand could invalidate your action in Court.

What does a Letter of Demand look like?

A simple Letter of Demand has the following components:

The identity of both the potential plaintiff and defendant;

A brief summary of the nature of the dispute;

A demand for certain remedies to be done (payment/action);

A deadline for when the recipient should comply with the demand;

A statement that legal action will be initiated against the recipient if the demand is not met.

If you receive a letter with the above components, rest assured that you have just received a letter of demand. Also, the letter would also be titled “Letter of Demand”, so that’s another way to know that you have been served with a letter of demand.

Can I ignore a Letter of Demand?

Since a Letter of Demand is technically not an action in Court, can you choose to ignore it?

You can. But Don’t.

In Small Medium Enterprise Development Bank Malaysia (formerly known as Bank Perusahaan Kecil dan Sederhana Malaysia Bhd) v. Lim Woon Katt [2016] 9 CLJ 73 (COA), the Court of Appeal held as follows:

(2) It is well settled that not all demand notices must be responded to and failure to respond must not be equated to admission of the claim under s. 17 of Evidence Act 1950 (‘EA 1950’). Failure to respond relates to conduct under s. 8 of the EA 1950. Conduct is a relevant fact for the court to take into account to give the relevant probative force to the version of the plaintiff and/or defendant’s case. (para 8) (3) Further, in commercial cases, courts have taken notice that, in the ordinary course of business, if one man of business states that he has agreed to do certain things, the person who receives the letter must answer it if he means to dispute the fact that he did so agree. In the instant case, the trial judge failed to take into account that the appellant’s demand notice in a commercial matter was not responded to. There was also no reason or justification for not responding to it. The omission of the trial judge to do so had compromised the decision making process. (para 8)

Hence, whilst not responding to a letter of demand will not be taken as an admission, it can be inferred against you depending on the circumstances of the Defense you intend on pleading.

It is advisable to consult a lawyer once you have received a letter of demand.

What your lawyer can do is respond to the letter of demand expressing your position with regard to the said demand. One of two things can happen, if the claim and the demand is false and/or unreasonable, your lawyer can reply to the letter denying the claim and stating the same for the record in the event the matter proceeds to Court.

Alternatively, your lawyer can also negotiate with the opponent to counter propose a different method of solving the dispute i.e. asking for a reduced sum to be paid or to be paid via installments.

Conclusion

As stated, a lot of disputes can be settled out of Court without having to foot exorbitant legal fees. Besides, if you lose in Court, you can be ordered to pay costs to the Plaintiff as well!

A letter of Demand is Step 0 of a initiating legal suit, you can keep it at that stage with responding to it adequately.