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Always acknowledge the letter.
You could do that and perhaps add in that these photographs were taken for a specific purpose and you can see no reason why you would have to take any more.
Tell them that they may want to take the issue up with the local authority who now have the images.
I would probably end by saying that you have no further comment to make. I would make it short and sharp and to the point.
If you didn't want to go that far, simply acknowledge the letter and say that you have no comment to make. Tell them their clients should take whatever action they feel appropriate.
Or, simply acknowledge it and say that you've noted the contents and leave it at that.
“We are in receipt of your letter of X the contents of which are noted. We have no comments to make. Yours faithfully.”