$5K for a letter of demand – wow, but what is it really?

It wouldn’t be the first time that a lawyer heard a comment from a client complaining that a three (3) page letter of demand cost $5K, for example. On its face, even at the hourly rates of the top tier it is quite a reasonable question. But what is it really? Is it just a three (3) page letter that makes a whole series of statements that is on a law firm’s letterhead, or is it more than that?

What are the inputs to a letter of demand?

The client sees the output, which in this example is a two (2) page letter of demand (Demand) that cost $5,000. There is no guaranteed result and no certainty about the response that will be received from the recipient of the letter – it could go either way, regardless of the client’s legal position. There are however a number of important steps which must be achieved prior to drafting and issuing a Demand. The time taken to complete these tasks costs may not be seen in the final product (the Demand), but they are essential to the process.

Assuming an agnostic cause of action, one (1) of the first things that has to be done is to confirm the identity of client and see if they have the legal authority to make the allegations on behalf of the entity involved. This is likely to involve the completion of some searches and some more identity checks. There is a thing called the Australian Solicitors Conduct Rules commenced 1 June 2012 (Solicitors Conduct Rules) which all lawyers in all States and Territories have to comply with.

Take the client’s statement

In popular television in the Criminal Jurisdiction a Police Officer takes a victim statement or interviews an alleged criminal. What happened, when, and what evidence do you have to support the allegations is what the Officer will be looking to elicit from the complainant.

In dealings between two (2) or more businesses which could end up in a State Court or the Federal Court of Australia, the process of taking a statement or constructing a “chronology of events” can take as little as a few minutes (for a simple debt collection matter) to days or even weeks in matters where the facts are complex and there are multiple events and pieces of documentary evidence to consider.

A corporate lawyer has to consider all the evidence, not just that which is in their client’s favour. In complex matters that may have spanned months or even many years, there may be thousands of documents involved and it’s the lawyer’s job to read, sort and catalogue it in case the matter escalates and it is later required for the purposes of discovery.

What is the purpose of a Demand?

One of the main reasons that a letter of demand is written is to put the allegations to the other side and see what they have to say about them. It’s often referred to as setting up the potential respondent or defendant, much like a basketballer throws the ball near the hoop aiming to have a team mate dunk it shortly thereafter. If the recipient of the Demand ignores it, then this failure to respond reasonably may just be read by a Judge in an affidavit from the lawyer that sent it.

The lawyer has to exercise forensic judgement

Non-lawyers think that lawyers send off letters of demand like gun slingers in an old western. There is a skill in drafting a Demand that if held next to a wall will cause the paint to peel and the holder to cringe. A lawyer has a duty to ensure that there is a reasonable legal cause of action behind the Demand. Rule 17.1 of the Solicitors Conduct Rules states:

“A solicitor representing a client in a matter that is before the court must not act as the mere mouthpiece of the client or of the instructing solicitor (if any) and must exercise the forensic judgments called for during the case independently, after the appropriate consideration of the client’s and the instructing solicitor’s instructions where applicable.“

Of course, the lawyer is always mindful of what a Judge will think about the Demand if it ends up before the Court.

Confirming instructions and advising on the implications

Once the Demand (or reply to a Demand for that matter) is received, the Lawyer will have the opportunity to read it and provide any feedback. The Lawyer is looking for the client to confirm that the instructions that they have been provided are accurate and are, where possible, included in the Demand. Where the matter has serious implications or involves significant risk, it may be preferable for Counsel to review it too. This ensures that the fact matrix is viewed objectively.

After all that’s done, provided everyone is happy with the contents, then its ready to be sent via a range of methods so that it can be proven that it was brought to the other side’s attention. Often times we would telephone the recipient too just to confirm receipt, making a contemporaneous file note (see link below) in case we need it at a later point.

So how do we respond to the query about $5k for a letter of demand?

When you know what can go into such a Demand or reply to one for that matter, the answer is quite simple really:

“Only $5k, is that all?”

Links and further references

Further information about letters of demand

If you need us to craft a letter of demand as the first step towards enforcing your businesses legal rights, contact us for a confidential and obligation-free discussion:

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au

Disclaimer

This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.