Legal Procedures – Letters of Demand

Debt recovery in South Australia is basically a three-step process. Your customer may pay at any stage during the process.

The three steps are:

1. Letter of demand or Final Notice;
2. Court action to judgment; and
3. Enforcing judgment.

Letters of demand

Letters of demand are used as the first stage of a debt recovery process. Court Rules require that written notice be given before commencing legal action.

Letters of demand are generally a one-page letter on letterhead which tells the debtor how much the creditor is owed and the date by which payment must be made. The letter will also warn the debtor that if the debt is not paid in time, the creditor will commence court action to recover the debt.

Some of the benefits of letters of demand are:

• They are inexpensive;
• They have a high rate of success with lazy or forgetful debtors; and
• They can comply with the final notice requirements of the rules of the various courts, removing the need for any additional ‘Final Notice’ form.

Drafting a letter of demand

A letter of demand should be as clear and concise as possible. The important information to include in a letter of demand is:

• To whom the money is owed;
• The amount of the debt and accrued interest;
• Reason why money is owing (i.e. invoice, other agreement, etc);
• When the money became due; and
• How payment can be made to remedy the overdue account.

Your letter of demand should also state that it is a final notice in accordance with the Uniform Civil Rules.

 It is desirable (but not essential) to enclose with the letter of demand a copy of the outstanding invoice(s). This often avoids the delay of the debtor asking for copies of invoices after receiving the letter, saying they are confused about the debt.

Timeline for payment in a letter of demand

In order to comply with the rules of the courts, the letter of demand must give a “grace period” before court action is commenced. For Magistrates Court claims, the “grace period” is 21 days from the date of service (i.e. receipt by the customer) of the letter.

For District Court claims, there are a few more requirements of notice of intended legal action, so it is worthwhile seeking specific legal advice if you have a debt owed to you of that size.

Introduction to Final Notices

Final Notices can be used instead of a letter of demand. Final Notices look more intimidating than your own letters of demand because they are a court form, which means that they have a reasonably high success rate, However, if you have an ongoing relationship with your customer it may be preferable to send a letter of demand, which is a bit less formal.

You can purchase a Final Notice at the registry of any Magistrates Court in South Australia. The cost can be claimed back from the debtor if:

• an agreement is not reached after sending the Final Notice; and
• you commence formal legal action; and
• your legal action is successful. 

Sending your letter of demand or Final Notice   

We recommend sending letters of demand or Final Notices by registered mail. This is a relatively small fee, but it ensures that you know that the document has been delivered to the debtor. I think that a letter of demand or Final Notice received by registered mail will be treated more seriously by the debtor.

Alternatively, you can give the letter to your customer personally, or to a representative of the customer if it is a business or company.