Things You Need to Know About Drafting a Letter of Demand in Malaysia

What is the purpose of a Letter of Demand?

A letter of demand (“LOD”) is a letter to request some demands, often for payment of money, before resorting to legal action. It lays down the foundation and background of the claimant’s claim against the recipient. Simply put, it is a written request sent by the claimant or their lawyer demanding action or payment from the other party before potentially taking the matter to court. The letter of demand lets the claimant explain clearly and formally what they believe the recipient did wrong. It’s an opportunity to establish the facts behind the demand.

Situations where a letter of demand may come in handy

Although mostly used to demand payment of money, a letter of demand is not just about demanding money; it can also be a call to action or a request to halt certain activities. Depending on the circumstances, there are various types of demands one can make via LOD, such as:

To demand overdue rent and vacant possession of a property

For instance, if a tenant hasn’t paid their rent, the landlord could issue a letter of demand for the outstanding amount. If the tenant still doesn’t pay within the given timeframe, the landlord can terminate the lease and request that they vacate the property.

To an end to ongoing nuisances despite prior verbal warnings

For example, if someone’s actions are causing a nuisance and causing mental disturbance to the claimant, they can send a letter of demand asking the person to stop the disruptive behaviour.

To demand a public apology

This is common in defamation cases. If someone has made a defamatory statement about another person, a letter of demand can be used to insist that they publicly apologise and acknowledge their mistake in the same manner or on the same platform where the statement was originally made.

Is it legally required to issue a LOD before going to court?

As the definition goes, a Letter of Demand is a formal heads-up telling someone you’re ready to take them to court unless they meet your demands. But is it a legal pre-requisite for a lawsuit? Not really.

While not legally required in Malaysia, it’s a common practice in the legal world to issue a LOD before a lawsuit, nudging the parties towards resolution and, hopefully, away from courtrooms. It’s a way of laying your cards on the table, showing what you’re claiming against the recipient. It’s not a must-have, but it’s a nice-to-have — a kind of courtesy notice before commencing a legal proceeding.

But wait, there’s an exception. If your contract specifically calls for a LOD, then it becomes a legal requirement. This was the case in the Catajaya Sdn Bhd v Shoppoint Sdn Bhd & Ors [2021] 2 MLJ 374. Here, the contract stated that termination was only valid if a LOD was issued. So, non-issuance of LOD would render the lawsuit voidable and can be struck off through an application made by Defendant in court.

Letter of Demand vs. Statutory Notice

The difference between a regular letter of demand and a statutory LOD must be understood. Although they may look similar on the surface, their purposes are distinct. Statutory LOD, dictated by Section 466 of the Companies Act 2016, is statutorily required to initiate a winding-up process against a debtor. Think of the former as a stepping stone towards resolving disputes, while the latter is a heavyweight legal move that can dissolve a company if not dealt with in time.

Do you need a lawyer for your letter of demand?

LODs can be issued by anyone but typically through lawyers. However, using your company letterhead for the LOD is also fine. Writing a letter of demand is straightforward and relatively easy if you know and remember all the key details and information leading to the demand.

It is advisable to have a lawyer review your LOD for complex disputes or when high stakes are involved. Poor drafting of a LOD may lead to misunderstandings and misinterpretations of its content, so engaging a lawyer can ensure correct wording and intent. Plus, when issued by lawyers, there is a higher chance of the recipient taking the matter seriously and urgently.

How to draft and write a LOD effectively

1. Ensure you send the LOD to the right doorstep. If the recipient is an individual, you can get their last known address through the National Registration Department (note: this can only be done through a lawyer). If the recipient is a company or business, their registered address can be accurately tracked by conducting a company search on the Companies Commission of Malaysia’s portal.
2. Description of facts. Provide and summarise what happened chronologically. Where reference is made, remember to attach the documents to support your demand.
3. Identify the breach. After laying out the facts, it is important to detail the wrongdoing of the recipient. Is it a case of non-payment, non-performance, or perhaps a breach of contract? It’s crucial to be specific to get your point across.
   1. “TAKE NOTICE that we have received instruction from our client to demand, which we hereby do, that you pay to us as solicitors, the outstanding amount of RM5,900, being the overdue rental from the month of August 2022 until December 2022, within FOURTEEN (14) days from the date of the receipt of this letter of demand.
4. Impact of the breach. Illustrate how the breach affected the claimant. At the heart of every complaint, there is a genuine grievance. This approach humanises the LOD and boosts its probative value, which can be used to formulate compensation awards if the matter is brought to court.
   1. “IT IS HEREBY STATED that as a result of the defamatory statement posted by you on Facebook, our client has suffered mental anguish and irreparable injury to their reputation as an honourable member of the society.”
   2. “IT IS HEREBY STATED that due to your failure to repay the outstanding amount of RM5,900 to our client on the due date as agreed, our client has to bear serious financial and economic loss.”
5. Potential consequences of failing to meet the demand. Usually, the failure to respond to LOD will be followed by the intent to pursue legal action against the recipient, and this intent should be communicated clearly in the LOD.
   1. “TAKE FURTHER NOTICE, in the event you fail to settle the outstanding amount stated above within the given time, we have our client’s strict instruction to commence a legal action against you without any future notice, and you shall be liable for the cost of the same.”
   2. State the preferred mode of settlement. Depending on the debt amount, you may offer several resolution methods. A lump sum payment or instalment plan are both viable options, offering flexibility to the recipient.
6. Deadline to fulfil the demand. In practice, a lawyer aims to send 1-2 LODs before resorting to court action, and each LOD gives a timeframe between SEVEN (7) until TWENTY-ONE (21) days for the recipient to pay the debt and meet the demand. This gives the recipient reasonable time to gather the fund to repay the debt and demonstrates the claimant’s effort to resolve the disputes.

The above basic and key elements can be included in a LOD to ensure that the recipient understands what demand is being made and which of their action or inaction has caused such demand to be addressed via the LOD.

“WITHOUT PREJUDICE”

Including “WITHOUT PREJUDICE” at the beginning of your LOD is pertinent and always considered an essential safety net. In practice, “without prejudice” communication is a legal tool originally introduced to help parties reach settlements without entering the courtroom. In essence, communication made without prejudice (in any form, i.e. verbal or written) cannot be used as evidence of guilt in court.

The general rule of thumb is that if communication between parties is made in such a manner, the parties cannot produce the LOD as a weapon in court and use it against the other. This principle offers parties the freedom to negotiate privately in good faith and to resolve issues before they escalate to a court hearing.

Responding to a letter of demand

Breathe easy! Receiving a Letter of Demand (LOD) doesn’t automatically land you in court. It’s okay to shrug off a LOD if it feels like a frivolous and vexatious claim. However, if you do not respond to the LOD after being issued one, your non-response will add credibility to the claim against you when the matter proceeds to court.

Alternatively, checking the LOD thoroughly to ensure you understand and decide whether you agree or disagree with the demand is a good practice. In the event of a disagreement or if you wish to challenge the content of the LOD, it is best to seek legal advice promptly to state and address the claim from your point of view.

If you have no dispute with the contents and claims in the LOD, it is time to negotiate a settlement or request an extension of time to address the demand. Achieving consensus means avoiding time-consuming civil suits, thereby saving cost and time. Responding to LOD also signals your seriousness and commitment to resolving the matter.

Takeaway

As the first step in initiating a legal claim, LOD should set out the general nature of the allegations and a summary of the damage sustained. It is important to make LOD as honest and detailed as possible. Usually, it will be necessary to do some preliminary work before issuing a LOD to ensure accuracy and precision. LOD should never be written in haste. It is the opening shot and must not misfire.

The claim should be stated firmly but courteously and not aggressively. If the recipient complies with demands in LOD, the matter is usually put to rest, but if it is otherwise, the claimant will have no other option but to pursue the matter in court. Therefore, it is best not to take a LOD lightly if it arrives at your doorstep.