Whenever one is faced with a legal dispute, the first thing that may come to mind is going to court. While that may be the right avenue for you to resolve your legal dispute, it is always desirable to take the first step by issuing a letter of demand (“LOD”) before commencing a court action. This article seeks to deal with the importance of a LOD and the legal weight of it.
In the gist of it, a LOD would entail a brief summary of the legal issue and ultimately, it should set out your demands to the counterparty. Ideally, the counterparty would accede to your demands and the matter would end there but more often than not, the counterparty would try to negotiate and come to terms on a middle ground basis. In that case, it would be desirable to execute a settlement agreement to that effect. If no amicable settlement is reached, then, you would have no choice but to consider further legal actions.
In the case of dealing with a recalcitrant counterparty, not only is there a possibility of the party not acceding to your demands but there could also be a failure to respond to your LOD altogether. Although there is no obligation to do so, it is important to keep in mind that the failure to respond to a LOD may be fatal.
What was held in Halim bin Saad v Chan [2021] 3 MLJ 717 should be digested here in this regard. The brief facts of Halim is summarised as below:
As a result of the defendant’s failure to repay a friendly loan given by the plaintiff, 2 LODs were issued to the defendant to demand for the repayment of the loan.
The defendant failed to respond to the said LODs and the plaintiff proceeded to file an action in court. The plaintiff eventually obtained a favourable summary judgement.
The defendant then applied to set aside the summary judgement and after it was dismissed, he filed an appeal to the Court of Appeal.
In dismissing the appeal, it was found by the Court of Appeal that the failure to respond to the LODs was fatal to the defendant’s case:
[46] Next, we note that the defendant did not respond to the plaintiff’s letter dated 19 October 2018 and to the solicitor’s letter of demand dated 4 December 2018. The non-response to the latter documents is fatal to the defendant. Being a person of business, the defendant could not have been unaware of the grave implications to himself by not responding to and repudiating the contents of both the letters.
The key takeaway is this - when you find yourself in a legal dispute, take the first step by issuing a LOD to the counterparty. This would be beneficial for you because you will stand a chance of reaching an amicable settlement without incurring hefty legal expenses and even if no amicable settlement can be reached, you may find yourself having an upper hand in the court proceedings commenced subsequently.
Conversely, in the event you find yourself in a situation whereby an allegation is made against you, be it in the form of a LOD or another document, and you intend to deny the allegation made, then you should always have a response to it instead of remaining silent. This would ensure that your rights are protected and nothing can be construed against you (see also: the Court of Appeal in Small Medium Enterprise Development Bank Malaysia v Lim Woon Katt [2016] 5 MLJ 220).
If you are looking for a legal representative to issue or respond to a LOD, feel free to reach out to our team.
By Christine Toh
This article is for general information and knowledge only. No reliance should be placed on this article as the same does not constitute legal advice. Readers are advised to consult with a certified legal practitioner for advice specific to their circumstances.