Whilst there is no requirement under New South Wales State legislation that a Letter of Demand be sent for a debt due and owing, our experience dictates that a well structured Letter of Demand can be ignored, raise issues that you were not aware of or elicit payment.

In civil proceedings to be issued in the Federal Court, the applicant can be required to file a Genuine Steps Statement pursuant to section 6 of the Civil Dispute Resolution Act 2001 (Cth) and must state “the steps that have been taken to try to resolve the issues in dispute between the applicant and the respondent in the proceedings” or the reason why steps were not taken.  Such steps could include the sending of a Letter of Demand and the response, if any, was received.  Although there is not any reference in the legislation to what can occur should a Genuine Steps Statement not be filed and served, the penalty would be at the discretion of the Court and could go to the question of costs of the proceedings.

It is usual for a Credit Manager to issue a Letter of Demand for payment of a debt due and owing as a first step on the debt collection path and it should clearly set out the details of the monies owed including who owes the debt and to whom, the amount of debt and the date of the debt so that there is no ambiguity in the Letter of Demand.

The wording used in the Letter of Demand should also be structured according to the business of the creditor.  For example, a demand to a construction company could initially be worded differently to a Letter of Demand to a cosmetics dealer seeking payment of a debt.  A subsequent Letter of Demand could also be sent warning of legal action should the initial request for payment be ignored.

The impact of a Letter of Demand can be enhanced greatly if it is prepared and sent by an experienced debt recovery lawyer.  The threat of legal action contained in a letter from a debt recovery lawyer conveys the message to the debtor that the requirement for payment has elevated with the instructing of the lawyer to make the demand and so the step to legal action should payment not be received is a simple one.  This encourages a response as no one wants to get sued.

The cost of a Letter of Demand is quickly forgotten when payment is received, or a costs order is made in your favour in subsequent proceedings to recover the debt.

At MSD Law, our 25 years of experience in debt recovery can give you a competent partner on the path to recover your debt.

So start collection of your outstanding debt today with a Letter of Demand from MSD Law to get maximum effect from a payment demand.