Letter of Demand is widely used as an antecedent to most civil litigations, be it to demand money due or payable, to perform an act, or to refrain from performing an act. However, experience over the years shows that most of the letters of demand sent were ignored and unanswered.

Ignoring a letter of demand deprive the opportunity for settlement

The imminent effect of ignoring a letter of demand is it deprives the parties of the opportunity for negotiation and to achieve a settlement before the matter is brought to Court. It leaves the demanding party no choice but to initiate legal proceedings to seek the desired remedies in Court or other competent tribunals. As a consequence, both parties have to incur costs to prosecute or to defend litigation which could have been avoided if a letter of demand was properly replied to.

Failure to rebut material allegations in a letter of demand may weaken the credibility of defence in Court

In addition, a letter of demand should not be left unanswered because it may prejudice the defence if the matter is being brought to Court. Letter of demand is the best and earliest opportunity for the addressee to present his/her version of the story. Although silence does not amount to an admission, the conduct of not responding to material allegations in a letter of demand may be taken into consideration by the Court in determining the credibility of the defence. There are numerous high authorities on this point: –

  1. In David Wong Hon Leong v. Noorazman Adnan [1995] 4 CLJ 155, the Court of Appeal went to the extent to say that failure to respond to a letter of demand, on the facts of that case should lead to entering of judgment;
  2. In Small Medium Enterprise Development Bank Malaysia v. Lim Woon Katt [2016] 5 MLJ 220; the Court of Appeal held that failure to respond to the plaintiff’s letter of demand weakened the probative force of the defence; and
  3. In Halim bin Saad v Chan Yok Peng [2020] MLJU 1900, the Court of Appeal held that the non-response to the letters is fatal. As a businessman, Defendant should aware of the grave implications by not responding to and repudiating the contents of the letters.

How to respond to a letter of demand?

A letter of demand usually contains the following: –

  1. Identification of the parties and relationship;
  2. Material facts which form the basis of the demand;
  3. the demand against the addressee (example: to pay a sum of money, to perform an act, or to refrain from performing an act);
  4. the period in which the addressee is to comply with the demand; and
  5. consequences for failing to comply with the demand.

Depending on the circumstances of each case, the addressee of a letter of demand has the following options:-

  1. Accede to the demand unconditionally
    The addressee may admit to the facts contain in the letter and accede to the demand unconditionally. In practice, this is rarely done because an admission can be used against the maker in Court later if the addressee failed to comply with the demand for whatever reasons.
  2. Proposing settlement on a without prejudice basis
    Another option available to the addressee is to propose a settlement (for example: to pay a different sum of money and/or by way of installments). In this regard, it would be prudent for the addressee to make it clear that the proposal is not to be used as evidence in Court later if no settlement is achieved by putting the words “Without Prejudice” and “Without Admission as to Liabilities” on the letter.
  3. Deny the claim and explain the denial

Alternatively, the addressee may deny the claim and explain why he/she denies the facts and the demand sets out in the letter of demand.

Closing Remarks

In conclusion, a letter of demand should not be ignored or left unanswered. How to answer a letter of demand would depend on the circumstances of each case. As such, the above explanation is provided only for general information and shall not constitute legal advice or opinion. The addressee is advised to seek independent legal advice on a case-to-case basis to respond to a letter of demand.