Key point

Where the intended recipient of a letter of demand denies receipt in fact, but it can be shown that its service complied with the relevant loan document, the letter of demand will be treated as served.

The facts

A property investor ("A") borrowed funds to purchase a buy to let property (the "Loan"). A subsequently defaulted on the Loan and Redstone Mortgages Limited ("R"), who had taken an assignment of the Loan, demanded repayment by way of a letter of demand served by post (the "Letter of Demand").

A denied receiving the Letter of Demand and refused to repay the Loan but, on summary judgment, R was awarded the principal and interest accruing on the Loan, as well as its costs of the proceedings (on the indemnity basis).

A appealed against the decision and the Court was asked to consider, amongst other things, whether valid demand had been made pursuant to the Letter of Demand, despite A complaining that:

  • it had not been received; and
  • it had not been sent to the address to which his statements of account were.

Decision

On hearing A's case, the Court stated that there was no doubt that R had sent the Letter of Demand and, while A denied its receipt, the Loan conditions were clear: if a letter of demand was sent by post, service was deemed to have occurred on the second working day after being posted, even if the letter were not to reach its destination or were returned. Service was therefore deemed to have taken place at the address to which the Letter of Demand was sent.

Further, while the statements of account in respect of the Loan were sent to an alternative address to the one to which the Letter of Demand was sent, A admitted that the address to which the Letter of Demand was sent was his contact address at his latest residence. Therefore, in the absence of being expressly notified otherwise, R was entitled to send the Letter of Demand to this address.

Accordingly, the Court found that the Letter of Demand had been validly served.

Comment

This case is an important reminder that a lender should comply strictly with the service provision in the relevant loan document. While a clearly drafted loan document with provisions for deemed service will suffice for making demand, lenders are best advised to have letters of demand served personally to avoid any doubt that it was received by the customer.

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