A letter of demand in Malaysia is an important document in a legal proceeding. This article explains what it is, its purposes, and how to reply and respond to it.
What is a Letter of Demand in Malaysia?
A letter of demand in Malaysia is a formal request to a recipient to comply with a demand. It can be for the recipient to perform its obligation including payment of unpaid debts, compensation for damages, or stop taking an action.
This formal letter of demand (LOD) usually serves as a legal demand for the following:
Payment of unpaid debts
For example, under the lease or rental contract, the landlord issues this letter for debt recovery in Malaysia after the tenant has overdue rental payment for not paying the rental according to the payment terms. This results in a breach of contract under the Contracts Act 1950.
Performance of specific actions
Apart from making outstanding payments, the letter can also be used to demand a recipient to perform an obligation it should, such as a seller transferring property to the buyer under a sale and purchase agreement.
The benefits of issuing this letter of demand in Malaysia are as follows:
Effective solution
It can be a good way to settle disagreements and demand the other party to fulfil the obligation such as timely payment of the outstanding amount without going to court. It will put pressure on the recipient to initiate negotiation on fulfilling its obligation and it saves time and money for both sides.
Proof of claim
It can be used as proof that the sender tried to find a peaceful solution by first issuing a letter of demand for the legal claim. These letters can be used in court proceedings later if needed.
Notices to the recipient
It gives the recipient one last chance to perform their obligations before legal action is taken. This is in case the recipient fails to perform the obligations without any bad intent such as forgetting about the outstanding invoice or debt amount.
Drafting a Letter of Demand
Here are the steps in preparing an effective letter of demand in Malaysia:
Step 1: Gather Relevant Information
You can gather and collect related documents such as:
Agreements or contracts that outline the terms.
Billing documents such as invoices, delivery orders, and statement history showing amounts and dates of transactions.
Communication between the parties
Copies of any previous reminders or correspondence sent to the debtor.
With these materials prepared, you can make your letter as factual and well-supported as possible to reduce the chances of disputes.
Step 2: Write a Clear Letter
The letter should contain certain few terms to be effective. These terms include:
Identification of the parties
The sender and recipient of the letter must be identified, including their full legal names, addresses, and other relevant contact information.
What the claim is about
It states the sender's claim, including the nature of the obligation, such as overdue payment of money owed and any facts related to the dispute.
The specific action needed
It should say exactly what specific action the recipient must take. It can be for payment of an outstanding sum or compensation. If it is for payment of monies, it should quantity the exact amount with interest(if any) and timeline for payment: either lump sum payment or with instalment plan.
Stipulated timeframe by which recipient must comply
It should give the recipient reasonable time to do what they should. This deadline should be clear, and the person receiving it should have enough time to respond.
Consequences for failure to respond by the deadline
It should explain what could happen in the circumstances if the recipient fails what they're supposed to do by the due date. This could mean starting a lawsuit or taking other steps to back up the sender's claim, which usually starts with these words:
"Take notice that if you fail to (requested obligation) within (no. of days), we have our client's strict instructions to commence legal action against you without further notice to you."
Step 3: Tone and Language
In preparing the letter, here are some tips on the tone and language:
Be clear and brief
The language should be clear and brief, without any jargon or legalese that isn't necessary. The recipient should be able to easily understand the basis of the claim and what they must do.Provide supporting documents
It is optional to include supporting documents like a receipt, invoice, contract, or other relevant proof with the letter. This can help make it clear what the claim is based on.
Keep your tone professional and formal.
Even though it is a formal document, ensure the tone is professional and polite. Don't use aggressive or threatening language because it could make things worse.
Step 4: Signature and sending
Lastly, sign the demand letter and send the document to the other party at its last known address or the address stated in the related contract. If it is a business, etc., a company limited by shares (Sdn.Bhd.), it can be sent to the registered or business address.
Options After Issuing and Service of Letter of Demand
Once the first demand letter is issued, there are 2 possibilities:
The debtor responds
A debtor’s response opens the door to negotiations for settlement. It is advisable to keep the discussion focused on the issues and on finding solutions. For instance, if the debtor proposes settling for less, negotiate a payment plan that everyone can agree on.
Record every interaction, whether emails, phone calls, or in-person meetings. These records can be useful evidence should the matter go to legal proceedings later.
The debtor did not respond
The other situation is the debtor did not respond after the issuance of a letter of demand. Then, the creditor, as a Plaintiff can commence a civil action for monies and other claims against the other party, as Defendant through issuing a court document known as a writ of summons in Malaysia. Depending on the claim amount, the suit can be initiated in Malaysia's lower courts known as the Magistrate or Session Court or High Court.
After the lawsuit ends, the Plaintiff may obtain a court order in his favour where the court orders the defendant, now known as the judgment debtor to pay a certain sum (the sum is known as judgment debt) to the plaintiff, now known as a judgment creditor.
If the judgment debtor fails to pay the judgment debt and depending on the situation and needs, then the judgment creditor can proceed for enforcement of the court order through a few methods such as applying for a garnishee order. If anyone is dissatisfied with the result of the court's decision, they can appeal to a higher court, such as the Court of Appeal (COA).
Consequences of Ignoring a Letter of Demand
In Malaysia, ignoring a LOD can have serious consequences, especially if the sender chooses to initiate legal proceedings. In the case of Small Medium Enterprise Development Bank Malaysia V Lim Woon Katt [2016] 5 MLJ 220, the Court of Appeal held it is not compulsory to reply to an LOD.
However, the failure to respond relates to conduct under Section 8 of the Evidence Act 1950. Conduct is a relevant fact for the court to consider to give the relevant probative force or weight given to the version of the plaintiff's and/or defendant's case.
The court went on to say that in the ordinary course of business, if one man of business states in a letter that one has agreed to do certain things, the person who receives that letter must answer it if he means to dispute that he did so agree.
Thus, failing to respond to an LOD will weaken the probative value or weight of his case as the courts have taken notice of that conduct. The High Court supported the reasoning in the Lim Woon Katt case in another case, PECD Construction Sdn Bhd v Freehold Point Sdn Bhd [2008] MLJU 127.
Also, if one fails to comply with or respond to a LOD, the sender may:
Start a lawsuit
The creditor may start a lawsuit against the debtor in court to enforce their claim. This could lead to a judgment being made against the debtor in the litigation proceeding, which could hurt its finances and reputation in a big way.
Incur additional costs
If any legal action is taken, the debtor may have to pay the creditor’s legal costs on top of any amounts owed under the claim.
Risk of asset seizure
If the creditor managed to get a court judgment against the debtor, the creditor could take steps to enforce the judgment, including seizing the debtor’s property or assets.
Responding to a Letter of Demand by a Debtor
If one receives a letter of demand in Malaysia, one must consider it seriously and respond correctly. Here are the steps to answer a LOD:
Carefully read the letter
Read the letter carefully to make sure you understand what the claim is about and find out if the creditor's claim is true and if you have good reasons or any justification to dispute the facts in the letter. This could mean looking at relevant documents, contracts, or other proof.Consider your options
Consider your options for responding to the LOD based on how you judge the claim. This could mean negotiating a settlement for a reduced sum or payment by instalments, disputing the claim, or complying with the demands of the letter.
Respond in writing
Writing a letter or email to respond to the LOD is essential. This answer should make it clear what your position is and what your response to the LOD is.
Be mindful of your response, as it may be your defence when a legal proceeding starts later. If you intend to negotiate, then it is advisable to mark the correspondence "without prejudice basis".
Under the Evidence Act 1950, if the letter is intended for negotiation, it may not be tendered in court as evidence of admission of the claim or liability. If you did not mark it as such, the court might not regard it as an outright admission, but it may be a relevant fact and have relevant probative force on the admission.
Seek legal advice
If you don't know how to respond or the situation is complicated, it is best to talk to a lawyer. They can give advice and can help you to respond.
The Role of a Lawyer in the Process
A lawyer is an essential part of the legal system, especially for the debt collection process as follows:
For the creditors
A lawyer can give good advice on the validity of the claim in case someone owes you money, help write a legal and effective LOD, and advise on what to do if the LOD is ignored or contested.For the debtors
A lawyer can advise the debtors on whether or not the claim is true, help them come up with a good way to respond and represent them in any legal proceedings that may come up.
In both cases, hiring a lawyer to issue or reply to that letter of demand in Malaysia can help ensure that the parties' rights and interests are protected. We understand that one may choose to prepare the letter oneself with the queries for ‘letter of demand sample’, ‘letter of demand Malaysia sample’, and ‘letter of demand sample Malaysia’ but no sample letter will be comprehensive for each unique situation.
Conclusion
A letter of demand in Malaysia is an important part of the legal system and a useful way to settle disagreements without going to court. If you need assistance or looking or looking for a law firm, you can contact us and our team will assist you.
Frequently Asked Questions
1. What is letter of demand in Malaysia?
A letter of demand is a formal written request to a recipient to perform a demand. It can be used by the sender to demand payment of the outstanding amount or to perform specific actions.
2. How long can you legally be chased for a debt in Malaysia?
Under Section 6 of the Limitation Act 1953, an action to recover debt under a contract should be initiated within 6 years of the date on which the cause of action accrues, meaning starting from when the debt is payable.
3. What happens after a letter of demand is issued?
After a letter of demand is issued, the recipient may reply to or ignore that letter. If the recipient intends to reply, it is advisable to read the claims carefully. Then, respond within the given time frame by either disputing, paying, or negotiating a payment plan.
4. Can I ignore letter of demand?
Ignoring a letter of demand is not advisable, as the courts will consider your conduct if it goes to court proceedings. This will weaken your case.
