Key takeaways
- When you receive a court summons, check the deadlines immediately and consult a lawyer before admitting liability or paying anything.
- The choice between fighting and settling must compare cash, timing, costs and the effect on the business.
- Finance must assess the effect on liquidity, the financial statements and bank conditions alongside the lawyer.
A company receives a summons from a customer. The amount claimed is so high that the owner is shaken. People around the owner advise paying quickly to end it and protect the company's reputation. Others say to fight to the very end. Both views are driven by emotion, like people running for water during a fire without knowing what started it. What is needed is a sequence of steps.
This article is a general financial framework, not legal advice. Every case differs considerably, and criminal or specialised cases may follow different procedures and deadlines. A lawyer must review the actual documents before any decision is made.
The first 72 hours
- Check the deadlines: In an ordinary civil case, the defendant must file a defence within 15 days of the date the summons is served, under Section 177 of the Civil Procedure Code. Service by posting the summons takes effect once the specified period has elapsed, under Section 79. Ask your lawyer to calculate the final date.
- Preserve documents: contracts, e-mails, deliveries, payments and chats, and stop deleting any relevant data.
- Appoint a spokesperson: have a single channel for contact with the other party.
- Beware of acknowledging the debt: A partial payment or a written acknowledgement of debt may interrupt the limitation period under Section 193/14, so have your lawyer check before you pay or reply in writing.
- Notify the relevant parties: check insurance policies and any requirements to notify banks or counterparties.
Comparing the options
| Issue | Fight the case | Settle |
|---|---|---|
| Outcome | Uncertain; you may lose or win in part | Amount and terms known in advance |
| Duration | May take several years if there is an appeal | Usually faster |
| Expenses | Legal fees, court fees, management time | Legal fees and the agreed settlement sum |
| Enforceability | According to the judgment, with appeal rights under the law | If the court issues a judgment by consent, appeal rights are generally limited, under Section 138 |
| Relationship | Likely to be damaged | Better chance of continuing to do business |
The settlement should answer these questions: does it close all claims, who bears the costs, what happens on default, can it be kept confidential, and can the company really afford the instalments? Do not sign a settlement you cannot afford to pay in instalments, because you may end up facing enforcement sooner than before.
Example: compare the numbers before talking
Hypothetical example: the other party claims THB 20 million. The lawyer gives a rough assessment of the probabilities. The case would take 3 years. Default interest is 5% per year under Section 224 (the rate applied since 11 April 2021, which may be adjusted by Royal Decree, so check the current rate). Litigation costs are THB 1.2 million. All figures are illustrative.
| Case outcome | Probability | Principal | Interest for 3 years | Weighted result (THB million) |
|---|---|---|---|---|
| Win | 40% | 0.0 | 0.0 | 0.00 |
| Partial loss | 40% | 10.0 | 1.5 | 4.60 |
| Full loss | 20% | 20.0 | 3.0 | 4.60 |
| Litigation costs | 100% | 1.20 | ||
| Weighted average | 10.40 |
The settlement offer of THB 12 million, paid in 24 instalments of THB 0.5 million, has a present value of about THB 11.06 million at a discount rate of 8% per year. Although the average cost of fighting the case is lower, the worst case is as high as THB 24.2 million including costs. The owner must ask whether the balance sheet can absorb that case, rather than looking only at the average.
The finance workstream
- Add the worst case to the cash forecast and test the covenants.
- Discuss with the auditor whether to recognise a provision or disclose a contingent liability under TAS 37.
- Check any collateral or bank deposits that could be affected if a court order is issued.
- Assess the tax effect of payments made under the settlement with a tax adviser.
Before entering the negotiation room
Finance should prepare three figures for the lawyer: the amount the company believes it should actually pay, the maximum it can pay without damaging liquidity, and a payment structure that suits its cash flow. Knowing the ceiling before the negotiation helps avoid agreeing out of emotion. An offer with a low total that must be paid quickly may be worse than a higher total that can be paid over a long period, so compare present value and the effect on covenants together.
Mediation does not mean giving in; it trades uncertainty for terms known in advance. Often a workable settlement is not only about money: for example, delivering corrective work, issuing a credit for the next purchase, or adjusting future contract terms. These options may cost the company less cash and still have value for the other party. The lawyer should check that the settlement covers all claims, including those involving related persons.
Conversely, there are cases where fighting may be reasonable: for example, the claim has no merit, the other party is using the case as pressure, or giving in would open the door to others making similar claims. The directors should record the reasons for the decision and review it when new evidence emerges, because the chances of winning or losing can change throughout the case. Do not hold on to the first assessment, and regular case status reports must be given to management.
Next steps
- Record the date the summons was received and send it to the lawyer immediately
- Organise an evidence file and stop deleting documents
- Do not pay or sign an acknowledgement until the lawyer has reviewed it
- Have the lawyer assess the probabilities as a range and calculate the worst case
- Compare offers by cash flow, not just the total amount
- Appoint someone responsible for reporting progress to the directors
- After the case ends, review the contracts and processes that led to the dispute