The return of “Frankenstein’s Slip”

01/07/26

Back in 2023, in Yieldpoint Stable Value Fund LP v Kimura Commodity Trade Finance Fund Ltd [2023] EWHC 1212 (Comm), the Commercial Court handed down judgment in relation to what it termed a “Frankenstein’s Slip”. See previous article here.

The case arose in very unusual circumstances, in which the parties had agreed a one-year sub-participation in an ongoing, fully-funded 4-year facility, in which the sub-participation matured well before the end of the facility, out of kilter with the capital repayments due under the underlying loan. When faced with the question as to what was supposed to happen at the maturity date, the Commercial Court concluded that Kimura was under an unconditional obligation to return Yieldpoint’s principal (meaning the arrangement was in effect a loan agreement, at least as to principal).

The Court of Appeal disagreed, overturning that decision in [2024] EWCA Civ 639. It decided that, whilst there was an obligation to return the full principal upon maturity if no default had occurred during the period, in the event of (at least some) default during the period (as was the case), the obligation on maturity was only to pay a “market value”, which was to be determined by ‘an unidentified mechanism’. 

Accordingly, Yieldpoint brought fresh proceedings, seeking to secure payment of the “market value”. After an unsuccessful strike out application on abuse of process grounds brought by Kimura, [2025] EWHC 2933 (Comm), judgment has today been handed down in Yieldpoint’s favour – [2026] EWHC 1558 (Comm). Rosalind Phelps KC, sitting as a Deputy Judge of the High Court, addressed “Frankenstein’s Slip” afresh, in light of the judgment of the Court of Appeal, considering how conventional “fair market value” principles applied to the unusual circumstances of the case, and determining the value of the “fair market value” payment that ought to have been made in light of findings as to the nature and extent of the default on the part of the underlying borrower on the maturity date.

The judgment is here.