Global Substitution Orders: how can they assist a lender, lessor, or debt acquirer?

A Global Substitution Order (GSO) can be an invaluable procedural device for saving the costs of pursuing multiple court claims following a change of company name or the assignment of a debt portfolio.

What are GSOs?

A GSO, sometimes referred to as an omnibus order, enables a successful applicant to substitute itself for the existing claimant or judgment creditor in relation to a large number of claims. This means they can take over those cases without having to file separate requests for each one. The applicant then becomes the claimant and may prosecute those claims.

Under the GSO procedure, the applicant only needs to make a single application, instead of myriad separate applications (one for each individual claim). Therefore, this streamlined process substantially reduces costs.

When do you need a GSO?

The High Court granted the very first GSO in 2010, enabling Northern Rock (Asset Management) Plc to be substituted for Northern Rock Plc, following a change of name, in the wake of the bank’s restructuring.

Usually a lender, a lessor or a debt acquirer/debt purchaser will apply for a GSO. For example, the applicant in question may have acquired a large portfolio of claims (which are already proceeding through the courts) under an asset sale agreement.

How do you apply for a GSO?

A lender, lessor or debt acquirer/debt purchaser may apply to a designated High Court judge, without giving notice of the application to the defendant/judgment debtor in each affected claim.

Affidavit evidence from a director is usually required to support the application. This may include:

• the reason for the application,
• a good arguable case for the granting of a GSO, and
• exhibiting copies of relevant documents for the judge to consider.

The evidence is critically important in an asset sale scenario, because the judge will need to be satisfied that the applicant has a full and unencumbered legal title to each claim’s underlying finance agreement.

Full and frank disclosure of the contractual documents is therefore essential. Choosing the most appropriate way to present voluminous documents and records to the judge is an important consideration for the applicant and its legal team. Sometimes they may need to balance such requirements with the desire to preserve confidential and commercially sensitive information.

What happens after the GSO is made?

The judge may give consequential directions after making a GSO. There are practical considerations, most notably regarding the service of the approved GSO.

The GSO may not need to be sent to every defendant but the judge may direct the applicant’s solicitors to effect service on the affected court offices. The civil courts are struggling administratively and such directions seem likely to become more common.

Applying for a GSO is a substantial task for the applicant and its legal team, which requires meticulous preparation and a measured, practical approach to the hearing. An applicant who appoints an experienced legal team and works closely with them will have the best chance of obtaining the desired outcome and saving costs.

If you have questions or concerns about Global Substitution Orders, please contact financial services lawyer David Farnell.