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How to Write a Letter of Demand in Australia – the Legal123 guide on how to recover a debt and get paid. A Letter of Demand is the document needed to make a formal demand on somebody or a business that owes you money to pay you to avoid further action including potential court action.
Using a Letter of Demand is an important formal first step when you decide to use the legal system to force payment. You must send a formal Demand before you can lodge a claim for your debt with the court. You can do this whole process yourself without the aid of a lawyer and save substantial fees but must follow a set legal process to not lose your claim rights.
An Australian demand letter can be used both for personal and business debts. You can stop the process at any time and agree a payment plan with the debtor and/or agree a reduced amount.
The term ‘debtor’ refers to the person or organisation that owes money.
The term ‘creditor’ refers to the person or organisation that is owed money.
This guide is divided into 2 sections: a Quick Guide with the top 5 FAQs and then the Complete Guide that answers most questions you might have about How to Write a Letter of Demand.
Click on the question to reveal the answer.
If you are owed money – for example, an outstanding bill for goods or services that has not been paid – you can send a letter threatening to take court action to recover your debt if you are not paid within a specified period of time.
Letters of Demand are very useful. They often encourage debtors to pay their debts but avoid the costs of using lawyers and chasing money owed through the courts. Every small/medium-sized business should be familiar with the legal process of how to write and serve a Letter of Demand.
Second, attach any relevant contracts, agreements, invoices and evidence that you supplied the goods or services as promised. These are evidence of your claim in the Letter of Demand.
Third, do not imply that court proceedings have commenced and do not make your Letter of Demand look like a formal court document.
Last, send the Demand letter by registered post or by courier to ensure you have proof that it was delivered. Then allow a reasonable time for the person who owes you money to comply with or respond to the letter.
Immediately check the Letter of Demand to ensure you understand and agree with the amount owed. If you disagree with the amount owed or do not understand how the amount has been arrived at, write to the person or organisation who sent the Demand asking for clarification or for any missing information.
If you do not believe you should pay the claim, immediately seek legal advice to dispute it.
Ensure you make it clear to the creditor that your discussions are on a “Without Prejudice” basis. This means that you can discuss the payment schedule without losing your legal right to change your position in the future, should you not reach agreement and end up going to court.
If you cannot afford to immediately pay the full amount, offer to pay in instalments and agree a payment schedule with your creditor. Remember, most creditors are willing to accept less than the full amount to avoid the time and expense of chasing the money via the courts.
If you are not able to pay at all, then write a letter to the creditor letting them know this.
You can use a Letter of Demand when you are owed money by either an individual or a company and they have not responded to your invoices or other requests for payment.
The types of debts that are commonly claimed include debts owed for payment of outstanding rent, services, monies owed, money lent and goods not supplied, although this isn’t a complete list. You can use it for business debts or if you were a contractor and were not paid for your services and feel it is time to take this more formal approach.
A Letter of Demand should not be used for loss or damage, but only for debts owed for goods or services rendered. For example, if somebody damages your property and you want them to pay for it, you cannot use a Letter of Demand.
Some States have a limit on the maximum amount you can claim through a Letter of Demand, ranging from $5,000 in Tasmania to $25,000 in Queensland. (See the table below for specific amounts in each State).
There is also a six year time limit (three years in the Northern Territory) to collect the debt, starting from the date when it became due. However, if the debtor at some point acknowledges the debt and gives a written promise to repay it, the time limit resets and starts again from the date of the written promise.
A Letter of Demand must include:
And you must be aware of any:
You should make sure the letter warns that you will take court action if the debtor does not pay as requested. Generally, it is best to give your debtor two to three weeks to make final payment, depending on how many Letters of Demand you decide to send.
Generally you should send two or three letters before beginning court action and provide 7-14 business days to pay the debt, which shows the court you have tried to be reasonable. If the debt is substantially overdue, two Letters of Demand should be sufficient notice to repay, but you may wish to consider providing a longer period of time to pay. In the event you only intend to send one letter or if it is your final Letter of Demand, you should consider providing 21 days for the debtor to pay.
Irrespective of the number of letters you send, you should give the debtor a total of at least three weeks to pay before starting court action. This gives the debtor a fair opportunity to respond and also gives ample time in the event they are away or are in hospital and have not received the letter.
It is very important to date your Letter of Demand so the debtor knows exactly the deadline to contact you and pay. Writing a Demand letter should be straightforward and clear. Do not make any allegations or arguments in the letter. Simply state the debt, when it was incurred, what it was for, confirm it still has not been paid and the number of letters you have previously sent.
Any proof of debt such as invoices, emails, letters or other documents relating to the debt should be copied and attached to the Letter of Demand.
There are several options:
When the debtor is a business the letter should be served to that business address, but it does not need to be given to a specific person. When serving the Letter of Demand on a person the letter should ideally be handed to them, so either a business or home address can be used.
If delivery is not possible, because they are either refusing to accept delivery or claiming they are not available, the server must leave the letter where the person can see it and explain to them that it is an important legal document relating to the debt. Then the server will need to sign an affidavit confirming they have served the Letter of Demand.
Evidence of receipt of the Letter of Demand is a requirement of the court. This is needed to demonstrate two key elements:
If you then go to court and the debtor states that they have not received a Letter of Demand, you will need evidence to demonstrate that you have made every attempt to send the Demand to them. If you do not have the evidence the court will likely adjourn the matter and ask you to attempt to settle it out of court first (and could consider that you have wasted the court’s time).
You need to ensure you have evidence of any and all Letters of Demand you send to the debtor. For example, when you send your Demand letter by registered mail, the debtor signs for the registered letter and you have evidence; sending the letter by regular mail will be inadequate.
You must wait a minimum of 21 days, then further action can be commenced. 21 days is suggested to give an adequate amount of time for the debtor to organize payment, negotiate with the creditor or to find an alternative arrangement.
Statement of Claim forms, instructions and information links for all States and Territories can be found in our Legal123 Letter of Demand package here.
You should check the State court websites to ensure you understand any and all recoverable amounts prior to taking any action. The recoverable cost of serving a Statement of Claim is capped by each State and the service fees vary from State to State depending on a number of variables, including service distances.
For example, if the debtor is out of State or is out of the country, serving them with the Statement of Claim can be costly. In addition, there is a time limit for service which must be met as a Statement of Claim must be served within 6 months of filing your claim.
Here is a helpful guide, current as at June 2017:
The Statement of Claim form must then be lodged in person at that court, except in Western Australia where claims can be lodged online. You will need to print and bring four copies of the Statement of Claim to the court for filing. One copy will be given back to you by the registrar once it has been checked, another will be sent to the debtor and the other two copies are kept by the registry at the court.
Filing fees for a Statement of Claim vary from State to State. The filing fees also usually depend on the amount of the claim, whether the claim is being made by an individual or corporate entity and sometimes whether the claim is being lodged online or not.
Here is a helpful guide, current as at November 2017:
There are several ways this can happen:
If you hire a process server, the cost is around $100 each time the server attempts to deliver the documents. It will cost even more for a process server if the debtor is inter-state or overseas.
Hiring a process server for a Letter of Demand is unnecessary when you can send the documents by registered post. However, if the debtor refuses to accept the registered post, or if you no longer know the location of the debtor, then you may have to consider hiring a process server to assist.
Normally the Statement of Claim must be served within six months of the claim being lodged in court.
You should check the State or Territory court websites to understand the rules that apply in your case. How much you can get back varies from court to court, and even if you can claim back costs, there’s usually a maximum limit. Normally there are costs you cannot recover, including the costs of using a process server to serve the Statement.
Once the debtor is served with the Statement of Claim, they will have 21 or 28 days to respond, depending on your location.
If the debtor doesn’t respond within this time, you can then apply to the court to have a default judgment in your favour, which means there is no need for a hearing. However, you must make this application within nine months of when you originally filed your claim with the court, or else the case will be dismissed.
If the debtor does file a defense or counter-claim, meaning they are planning to defend the claim and argue against the debt, you will have to attend court.
The debtor may also contact you directly to try to settle the case without a court hearing. If the defendant only admits to owing part of the claim then you can still proceed with the court hearing, or decide to accept a lesser amount. In many cases accepting a lesser amount may be your best option, rather than continuing with the court process and physically having to attend court, particularly if you believe the debtor will not be able to pay the full amount due to financial issues.
If there is a default judgment in your favour, meaning the court has not heard from the debtor, you do not have to go to court and the court will award you the right to claim your debt. This right can only be set aside if the defendant can show that they did not receive the Statement of Claim.
The NSW step-by-step guide walking you through the whole process can be found here.
If a debtor files a defense or a counter-claim against you, then you will need to attend court. You will also have to go in front of a magistrate and present your case. You will need to bring all evidence of the debt, including copies of Letters of Demand and receipts from sending those letters. You will be given advance notice of the defence the debtor plans to make and you have to be prepared for this. You will also need to dedicate at least one whole working day to attending court.
If the debtor does not show up to the court hearing, you can file for a default judgment against them and the court will award you the right to immediately claim your debt and costs.
If there is settlement at any time between yourself and the debtor after you have served the debtor with a Statement of Claim, you should obtain a consent judgment. This means the court is aware of and can enforce your agreement.
This may be done by having the terms of the settlement become an official ‘judgment’, which means the court can register and enforce this agreement.
A consent judgment can be made in two ways:
Having a consent judgment is important because it finalizes your case. It means you both have agreed on settlement of the debt. Additionally, if for some reason after settling the debtor decides not to pay, you can then bring enforcement proceedings against them.
A step-by-step guide to getting a consent judgment in NSW can be found here.
If you win the case, whether by default or at a hearing, the court will issue a judgment stating that the debtor must pay you. Normally the debtor will pay you on their own after such a ruling.
If you are not paid, you will need to begin enforcement proceedings against them. You will have 6-12 years from the judgment (depending on what State or Territory you are in) to begin enforcement proceedings. After the proceedings a judgment will be entered onto the debtor’s credit record that lasts 5 years. Usually this is enough incentive for the debtor to pay.
If the debtor still does not pay, the court has a number of options to ensure you are paid. These include garnishing the debtor’s wages, ordering the debtor’s assets be sold or it can go as far as imprisoning the debtor! However, this does not necessarily mean that you will get your money because if the debtor is bankrupt or unable to be located, you may not be repaid.
If you receive a Letter of Demand you should never ignore it. If you believe it was sent by mistake or it is frivolous you should contact the sender and try to sort it out.
If you do owe the debt but either have an issue with the payment or are unable to pay, you should still contact the sender of the letter to arrange for payment or to attempt to negotiate an alternative payment arrangement.
A court will not look favourably on you if it believes you have not tried to mitigate or sort out your dispute. The court will see it as you being disrespectful of court time and contemptuous.
As a Letter of Demand is the last step before court action is taken, you should always try to clarify any type of dispute or issue before you receive a Statement of Claim.
You should write a reply to the person who has sent you the letter. Depending on your situation there are four options:
You should reply as quickly as possible and keep a copy of this reply.
You can negotiate any type of payment option, so long as the creditor agrees. You can suggest a monthly payment plan, or another arrangement such as half the debt to be paid now, half to be paid at a later date.
Depending on your financial situation, a creditor may be willing to accept a lesser amount if you are on the verge of bankruptcy and unable to pay. It is likely that a creditor in this situation will be willing to receive a lesser amount rather than risk ending up with nothing. Additionally you can make an application to the court to pay by instalments.
We hope you found this article on How to Write a Letter of Demand useful.
You may need to write a letter to an insurance company requesting money when you have a claim. Chat with an attorney before you fire off your letter to make.
By This Is Money
Updated: 14:09 BST, 23 February 2007
Here is an example of a letter you might write to recover money owed to you before proceeding with a small claim at county court.
2 Spring Gardens Anytown AO6 3BX
11 April 2005
Dear Mr Green,
You came to repair my central heating boiler on 6 January. I rang you on 7 January and again on 10 January to tell you it was still not working properly.
You promised to call and put it right but did not. I had to get someone else to come and repair it on 26 January which cost £157 + VAT.
I asked you on 2 February to pay this money because it was work you should have done.
You have not paid it.
If you do not pay me the money by 19 April 2005, I will issue a county court claim against you.
Mrs V Cross
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“M/s. Anna cloth store, House no. 07, Road no. 14 North 302, TUCSON AZ 85705, USA has purchased 2000 meters of suit cloths with a total cost of 12000$. Form Michel enterprise. : M/s. Anna cloth store has returned the shipment as quality does not match the order specification.” – Write a claim letter to the manager, Michel enterprise, 20, Kualampur, Malaysia. Claiming full refund of the purchase price.
M/s. Anna cloth store
House no. 07, Road no. 14 North 302, TUCSON AZ 85705, USA
Ref. …………………………… November 27, 2013
(Wholesaler of quality fabrics)
20, Kualampur, Malaysia
On November 07, 2013 we purchased 2000 meters suit cloths. The quality of your shipment does not match with our order specification. Since the use of low quality cloth will damage our business goodwill, we have returned your shipment along with a request for cash refund of 12000$.
We believe that your company has deep concern for its customers. We are also convinced with the earlier dealing of your company.
Refunding the money within the next 10 days will be highly appreciated. We are looking for future business.
“The Bangladesh Commerce College, Road No 7, Uttara, Dhaka has purchased some books from Jamuna Publishing Pvt. Ltd. Bangla Bazar, Dhaka. The publisher has sent older edition of the books.” – Write a claim letter for replacing the books with the new edition.
The Bangladesh Commerce College
Road No. 7, Uttara, Dhaka. Phone————————
Ref. ……………………………… November 25, 2013
Jamuna Publishing Pvt. Ltd.
Bangla Bazar, Dhaka
In response to our November 10, 2013 order letter, you have sent the ordered books. You delivery has reached to us on November 20, 2013. We have got all the books. But you have sent the older edition of some books.
Books of older edition are being returned. We are requesting for replacing the books with 2013 edition.
Your replacing the books soon will be appreciated
The Business Communication
Write a letter to the Zonal Manager and claim money on maturity of Insurance Policy. Baranidharan S,. 10 B, Saai Appartments.
Numerous reasons could prompt you to write a letter of intent to claim compensation, such as completing a job for someone who did not honor the agreed-upon payment amount or paying out-of-pocket expenses to repair something that was someone else's responsibility. Essentially, a letter of intent to claim compensation is a business letter that formally requests the responsible individual or entity to pay you a specific amount to cover the costs of the situation and informs them of your intended course of action if they fail to do so.
Place your name and contact information at the top of the letter. Write the name and contact information of the recipient beneath this. Use the individual's name in the greeting, such as "Dear Mr. Doe." If your letter is addressed to an organization or business, direct it specifically to the person in highest authority at the local level.
Begin the letter by stating your reason for writing -- your intent to claim compensation. Include the amount of money you believe is owed to you and the reason why this money is owed, providing details and names where appropriate.
Write a statement in the next paragraph outlining a reasonable time frame for the compensation to be delivered to you and how you will accept payment (for example, check or money order). Inform the recipient that if payment is not remitted by the time frame given, you will take further action to claim the monies owed to you.
Outline what you intend to do if the recipient of the letter does not respond or does not provide payment, such as filing a suit in small claims court or seeking the assistance of higher management if appropriate. Keep this paragraph brief and maintain a professional, non-threatening tone. Do not make demands; simply state your plan of action for ensuring payment.
Close the letter by providing the recipient with the best time and method of reaching you, as well as your attorney's information if you have one. Thank him for his cooperation, and end with a cordial salutation like "Sincerely" or "Best regards." Be sure to sign your letter before sending it.
when you complain. Our legal experts have created scores of template complaint letters to help you. Letter to claim compensation for poor restaurant service.