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Aussies have been watching too many American lawyer shows, where a tree has legal personality and non compensatory damages far exceed compensatory damages. This is not the case in oz, but we watch american tv so we expect $100m in exemplary damages. Not going to happen!!

If I was the OP I'd just take it through VCAT too... I wouldn't suggest it to the OP, but if it was me I might respond to the letter, just to run up the tenants legal fees. A nothing letter - one that causes the tenants lawyer to charge 6m to open the letter, 6m to call the tenant and 18m to...

Most people have a giggle (like yourselves) when someone says "you will be hearing from my lawyer". The same people have to take an emergency trip to the toilet when they receive a letter from a scary solicitor. Some pay up. OP - treat the letter as if it was written by the tenant.

Are you a member of a union? Some also provide a free legal consult. (not that I think you need it)