Rawstron & Anor (Executrices of the Estate of Lucian Freud) v Freud

In his long and successful life, the late Lucian Freud achieved international recognition as an outstanding painter and draughtsman, and, with it, considerable wealth. He also lived a very full private life. These matters form the background to these proceedings under CPR Part 8, which raise a short point of construction concerning Lucian Freud’s last Will dated 10 May 2006 (“the Will”). As in the case of his previous will, which was made on 25 June 2004 (“the 2004 Will”), and which it superseded, the Will was professionally drawn by his solicitors, Goodman Derrick LLP. Lucian Freud died on 20 July 2011. His net United Kingdom estate was sworn for probate at just under £96m, and his residuary estate after payment of legacies and inheritance tax but before administration expenses has been estimated by the Claimants to be worth about £42m.

The First Claimant was Lucian Freud’s solicitor. She first provided legal services to him in 1986, the same year as she became a partner in the firm that was then called Goodman Derrick & Co. She did an increasing amount of work for him and had an increasing amount of contact with him from then on, speaking to him almost daily for about 20 years before he died. The Second Claimant is one of Lucian Freud’s children. The Claimants are the executrices of the Will, and bring this claim in that capacity.

Although at one time this was disputed by the Claimants, it is accepted, at least for purposes of the present application, that the Defendant is another of Lucian Freud’s children. (According to the papers before me, these children numbered “at least 14”).

Paragraph 6 of the Will provides as follows:

“I GIVE all the residue of my estate (out of which shall be paid my funeral and testamentary expenses and my debts) and any property over which I have a general power of appointment to the said Diana Mary Rawstron and the said Rose Pearce jointly”.

Shortly stated, the issue that I have to decide is whether, on its true construction, this provision makes the Claimants absolutely entitled to Lucian Freud’s residuary estate. A declaration to this effect is the only relief claimed by their CPR Part 8 Claim Form.

While the Claimants contend this is so, they have also made clear that it is their case that this gift of residue is subject to a trust imposed by Lucian Freud. The terms of that trust have not been disclosed by the Claimants. Indeed, one of their purposes in taking the course that they have adopted in these proceedings is to avoid revealing the terms of that trust to the Defendant, on the basis this would go against Lucian Freud’s wishes. However, they have informed the Defendant that he is not a beneficiary of the trust.

The Defendant’s case is that, on a proper construction of the Will, Lucian Freud’s residuary estate was not given to the Claimants for their absolute benefit, but instead was given to them to hold on trusts which are not set out in the Will. On that basis, any trust imposed on the residuary estate can only have been a half secret trust.

In light of the different requirements for creation of a valid half secret trust in comparison to a fully secret trust, the Defendant would then wish to explore whether any valid half secret trust was created, or whether there was an intestacy of the residue. In the event of intestacy, the Defendant would be entitled to a share of the residue, whereas if the Claimants’ case is right the Defendant’s only claim for provision from the estate arises under the Inheritance (Provision for Family and Dependants) Act 1975.

In fact, the Claimants’ evidence, contained in paragraph 12 of the First Claimant’s witness statement dated 27 November 2013, is that even if the Defendant’s construction of the Will is correct “the secret trust attaching to the gift would still qualify as a half secret trust, as its terms were communicated to my fellow Claimant and [me] before the Will was executed”. The Claimants consider that the material which supports this case is confidential, and that providing it to the Defendant is likely to lead to ever increasing demands for verification. They have therefore declined to provide it to the Defendant. For his part, the Defendant is not prepared to concede the point in the absence of supporting material. In the result, on 19 December 2013 Master Price gave directions to enable this issue to be determined in the event that the Claimants’ current claim fails.

These rival cases were argued with skill and moderation, both orally and in writing, by Michael Furness QC for the Claimants and Tracey Angus QC for the Defendant.

There was no dispute between the parties concerning the relevant legal principles.

Save where section 21 of the Administration of Justice Act 1982 (“section 21”) applies, a will should be interpreted in the same way as a contract, namely as summarised by Lord Neuberger of Abbotsbury PSC in Marley v Rawlings [2014] UKSC 2, [2014] 2 WLR 213 at [18]-[19]:

“[18] During the past 40 years, the House of Lords and Supreme Court have laid down the correct approach to the interpretation, or construction, of commercial contracts in a number of cases starting with Prenn v Simmonds [1971] 1 WLR 1381 and culminating in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900.

[19] When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party's intentions. In this connection, see Prenn, at pp 1384–1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as H E Hansen-Tangen) [1976] 1 WLR 989 , per Lord Wilberforce, Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251, para 8, per Lord Bingham of Cornhill, and the survey of more recent authorities in Rainy Sky, per Lord Clarke of Stone-cum-Ebony JSC, at paras 21–30.”

Neither side before me contended that section 21 is in point. Section 21 is headed “Interpretation of wills – general rules as to evidence”, and provides as follows:

“(1)

This section applies to a will –

a)

in so far as any part of it is meaningless;

b)

in so far as the language used in any part of it is ambiguous on the face of it;

c)

in so far as evidence, other than evidence of the testator’s intention, shows that the language used in any part of it is ambiguous in the light of surrounding circumstances.

(2)

In so far as this section applies to a will, extrinsic evidence, including evidence of the testator’s intention, may be admitted to assist in its interpretation.”

The judgments in the earlier Court of Appeal decision in Royal Society for the Prevention of Cruelty to Animals v Sharp [2010] EWCA Civ 1474 are to the same effect. In that case, Patten LJ (with whom Black LJ agreed) said at [19]-[20] and [22]:

“[19] One thing on which the parties were in agreement was the approach of the Court to the construction of a will. As mentioned above, it was common ground before the judge that no extrinsic evidence was admissible. He had therefore to follow the guidance of Lord Simon LC in Perrin v Morgan [1943] AC 399 at 406 and to construe the language of the will so as to find:

"… the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case - what are the "expressed intentions" of the testator."

[20] We have therefore to examine the language of the will in its context taking into account the will as a whole; any relevant background circumstances which inform the meaning of the words used; and giving to those words their ordinary meaning unless they are obviously used in some special or technical sense …

[22] … it is dangerous to approach the assessment of the Testator's intentions other than through the language of his will. The first relevant consideration in my view is that the will was professionally drafted by a solicitor who has to be assumed to be competent. Although solicitors do obviously make mistakes, there needs to be something in the language of the document or its admissible background to justify that inference. More importantly, those factors must be such as to permit the Court to give the words actually used a meaning which is not strictly in accordance with the usual rules of grammar or vocabulary: see Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896.”

The Master of the Rolls, Lord Neuberger of Abbotsbury, said at [31]-[32]:

“[31] As Patten LJ impliedly acknowledges by his reference to Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896, the court's approach to the interpretation of wills is, in practice, very similar to its approach to the interpretation of contracts. Of course, in the case of a contract, there are at least two parties involved in negotiating its terms, whereas a will is a unilateral document. However, it is clear from a number of cases that the approach to interpretation of unilateral documents, such as a notice or a patent, is effectively the same, as a matter of principle, as the court's approach to the interpretation of a bilateral or multilateral document such as a contract: see Mannai Investments Ltd v Eagle Star Insurance Co plc [1997] AC 749 and Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2005] RPC 9.

[32] One obvious difference between a bilateral document such as a contract and a unilateral document such as a will, is that parties negotiating a contract may well be consciously content to include an obscurely drafted provision, on the basis that it represents an acceptable compromise, which enables overall agreement to be reached, whereas, save in a most exceptional case, which it is hard to conceive, a person making a will has no interest in obscurity.”

Accordingly, it was common ground before me that no extrinsic evidence as to the instructions given on behalf of Lucian Freud, or as to what Goodman Derrick LLP intended by their drafting, should be admitted as an aid to interpretation of the Will. To lay people involved in a single piece of litigation, this may seem surprising. Suppose a testator gives clear and unequivocal instructions in writing as to what he wants to achieve by his will, his solicitor sends him a draft will with a covering letter explaining how the solicitor has sought to reflect those intentions in the draft will, and the testator signs the will and returns it to the solicitor with a letter saying that he is happy that his intentions have been achieved? Some might think all that a good aid to interpretation.

Turning from principles of interpretation to the difference between fully secret and half secret trusts, Theobald on Wills , 17^th edn, states at paragraphs 6-001, 6-004 and 6-009:

“… secret trusts provide for the testator a means of creating a trust without publicly identifying the beneficiary and/or the terms of the trust. A trust is fully secret if the will does not disclose that the trust exists, and half secret if the will discloses that there is a trust but does not disclose the object and/or terms of the trust …”

“In the case of a fully secret trust, it is immaterial whether the trust is communicated and accepted before or after execution of the will … Nevertheless, communication must occur in the testator’s lifetime, otherwise it cannot be enforced and the legatee will take beneficially …”

“A half secret trust will fail if the details are not communicated to the trustee until after the execution of the will … There is thus a distinction between a fully secret trust, where the trust can be communicated at any time before the testator’s death; and a half secret trust, where the trust must be communicated before or contemporaneously with the will …”

The statements in Williams on Wills, 9^th edn, at paragraphs 36.1, 36.4-36.5 and 36.10-36.11 are to the same effect:

“There are two kinds of secret trusts in common use. In the first the property is given to the apparent beneficiary for an absolute interest though he secretly acquiesces with the testator that he will hold it on certain trusts. The other class is where in the will the apparent beneficiary is by the terms of the will a mere trustee but the nature of the trusts upon which he is to hold the property are not disclosed or not fully disclosed.”

“… The [fully secret] trust but not the gift itself will fail where the intended trust, though not void in law … is not communicated to the donee in the lifetime of the testator … Where …the trust … fails … because it is not communicated to the donee … the donee takes the gift absolutely and free from the trust …”

“Where the property is given by will to persons upon trusts which are referred to in, but not defined by, the will, the trustees cannot take beneficially and the trustees hold the property either for the secret beneficiaries or, if the trusts fail, for those entitled to residue or on intestacy as the case may be … If the beneficial trusts are not defined and communicated to the trustees on or before the execution of the will, the trusts are unenforceable, as being an attempt to empower the testator to make unwitnessed dispositions by naming trustees and leaving the details of the trusts to be supplied afterwards.”

Ms Angus QC referred me to three further authorities.

In Saltmarsh v Barrett 3 De G F & J 279, by a will dated 11 October 1830 the testator directed his debts, legacies and funeral expenses to be paid, and then gave legacies to certain charities. The testator then stated as follows: “And I give to my good friends Richard Barrett and Jonathan Barrett and Robert Williams a legacy of £19, 19s. each, and appoint them executors of this my will. I also give and bequeath the whole of my estate and effects whatsoever and wheresoever absolutely unto the said Richard Barrett, Jonathan Barrett and Robert Williams, to hold the same unto them, their executors and administrators, according to the several natures and tenures thereof, charged nevertheless and I do hereby charge so much of my estate as shall at the time of my decease consist of long annuities to and with the payments to the several persons hereinafter mentioned during the continuance of such long annuities, if the several parties to whose benefit the same was intended so long live”. Then followed a number of charges for different persons for their lives, if the long annuities should so long continue, with a direction that in case of the personal incapacity of any of the donees the said “executors or the survivors or survivor of them” should apply the portions of such incapacitated persons for their benefits. The testator then made various charges on his Reduced Bank annuities, some of them being gifts of sums to be accumulated, and declared that, in all cases where he had directed any gift or payment to be accumulated, his “executors” should be at liberty to invest on mortgage or in the funds, or in such other manner as therein mentioned, as they or either of them might think fit or most expedient, and should not be responsible for any loss arising from the exercise of such discretions as to the mode of investment, unless the loss should be wilful. The testator then gave the “executors” power to vary the securities in which any parts “of the several gifts, bequests and legacies” might be invested, and declared that they should not be answerable for any loss arising from investments, unless the loss was wilful. Finally, the testator provided: “And I also direct, that all costs, charges and expenses which my said executors or any of them may incur or become liable to shall be borne and sustained by any monies which may come to their hands from any part of my estate; and out of such monies, from whatever source derived, I direct all of them to deduct, retain and apply such sums as will fully reimburse themselves respectively.”

The Master of the Rolls, Lord Romilly, who considered that the question was one of very considerable difficulty, held that the executors took the residue not beneficially but as trustees, and that it belonged to the testator’s next of kin. On appeal, Knight Bruce LJ came to the opposite conclusion, holding that “The executors … seem to me to have been made residuary legatees for their own benefit absolutely” although being “far from confident as to the accuracy of this conclusion, which indeed … is probably erroneous”.

However, Turner LJ agreed with the decision of the Master of the Rolls, with the result that the appeal was dismissed. Turner LJ reasoned as follows at pp285-287:

“The question therefore is, whether, upon the true construction of this will, the testator intended to give the residue to these three persons, not only absolutely but beneficially also. That the words of gift which the testator has used would be sufficient to pass the residue to these three persons, both absolutely, as the testator has expressed it, and beneficially, cannot be doubted; and, no doubt, we are bound to collect the testator's intention from the words which he has used; but then it is from the words of the whole will, and not of the particular clauses only, that the intention must be collected. This has been the view which has been taken in all the cases.

Now it is to be observed that the gift to these three persons is of the whole of the testator's estate and effects; but the testator had before directed his debts, legacies and funeral and testamentary expenses to be paid, and had before given several legacies to charities, and equal legacies of small amount to the executors. He must have intended, therefore, that these payments should be made out of what was given to these three persons, and that to this extent at least they should take as executors or trustees; and if it be clear that they were, as to part of the gift, to take in either of those characters, I cannot see my way to hold that, as to the rest of the gift, they could be intended to take beneficially. The gift to these persons, too, is in joint-tenancy, which is indicative of trust; and the long annuities, so far at least as they are charged, are treated as remaining vested in them as executors. It may be observed, too, that the power to vary securities is not in terms expressed to be, and I doubt whether it was meant to be, confined to the period of the subsistence of the charges. Again, there are here equal legacies to these three persons who are appointed to be the executors, and these legacies must be payable out of the estate which is said to be given to these three persons beneficially, so that the testator, according to the Appellant's contention, was at the same time giving to these three persons part and the whole of the same estate. It was said that these legacies may well have been given for the purpose of putting the executors to that extent upon the same footing as the other legatees; but that argument has been urged in many cases in which the question has been whether executors to whom there was no express gift were trustees of the residue for the next of kin, and it has not succeeded. I do not see my way to hold that much if any greater weight is due to the argument in cases in which there is a gift to the persons who are the executors, when the question is what is the nature and character of that gift. There is, besides all this, the indemnity clause, which extends to the whole estate; and it is surely difficult to suppose that the testator could intend to provide for the indemnity of the executors out of funds which he intended them to take beneficially. Looking to all these considerations, I have come, though certainly not without doubt, to the same conclusion as the Master of the Rolls, that this testator did not intend that these executors should take the residue beneficially, and the appeal, therefore, must be dismissed …”

In Williams v Arkle (1875) LR 7 HL 606, the facts, according to the headnote, were as follows. The testator had a sister, a wife, and two (illegitimate) children. By his will he appointed George Arkle (“GA”), if GA should survive him, his executor and trustee, but if GA should die in his lifetime he appointed Benjamin Arkle (“BA”). He then gave “the following legacies”: £1000 each to GA and BA; £2000 to a great nephew; £100 to his wife, and £100 apiece to his two children. After the gift of other legacies, he gave annuities to his wife and to his two children subject to restrictions as to anticipation, and an annuity to his sister Mary Williams. He then gave his freehold and leasehold property (specially described), “and all other my real estate and the residue of my personal estate” (subject to two debts due to his sister) “unto the said GA for all my estate and interest therein respectively if he shall be alive at my decease, but if he shall die in my lifetime, then I give my said real estate and residuary personal estate unto BA for all my estate and interest therein respectively.” He empowered his trustee to retain or change his investments, to be free from all responsibility on that account, to employ accountants and receivers, to be the guardian of his children during their minority, and he directed that the trustee should possess all powers granted to trustees by the 23 & 24 Vict. c. 145 (Lord Cranworth’s Act). The House of Lords held that the gift of the real estate and of the residue of the personal estate (the former unaccompanied by any trust) was not affected by the other provisions of the will, and that GA took them beneficially.

The leading speech was given by the Lord Chancellor, Lord Cairns, who first rehearsed the points relied upon by the Appellant, as follows (at p617):

“George Arkle, the Respondent, does not appear to be a relative of the testator. The residue is given, in case George Arkle dies in the lifetime of the testator, to Benjamin Arkle. The same George Arkle is made executor, and the same Benjamin Arkle appointed executor in case George shall die in the testator's lifetime— George, and, in the event of his death, Benjamin is appointed not merely executor, but trustee of the will. George and Benjamin have, each, a legacy of £1000. After the residuary clause there is a power authorizing the testator's trustee to invest his personal estate on such securities as he shall think best, and to continue any investments subsisting at the testator's death, and to employ such accountants and receivers as shall be necessary. The trustee is appointed guardian of the children, and it is declared that the trustee shall have, and may exercise, all or any powers and authorities given to trustees by the Act commonly called Lord Cranworth's Act. These are the provisions in the will relied upon by the Appellant.”

Lord Cairns continued at pp617-618:

“It is to be observed that none of these provisions refers to or touches the real estate, and, as I have already said, no trust has to be answered out of the devise of the real estate. As regards the personal estate, there are legacies given amounting to about £5000, and annuities which would require the appropriation of something like £10,000 more; and one of these annuities was for the separate use of a married woman. There were, therefore, trusts connected with the personal estate as to which the executors would be trustees, and as to which powers for investment would, and powers for employing clerks and accountants might, be necessary; but all these trusts and purposes connected with the personal estate would have to be satisfied before the residue could be ascertained, and it is the residue and not the universitas of the personal estate which is given to George Arkle.

But there are several other circumstances connected with the will which in my opinion strongly support the natural construction of the words as a beneficial gift to George Arkle. The testator had a wife and two illegitimate children, who at the date of the will were of the ages of twenty and sixteen, and for all of them he made specific provision by his will. His sister, the Appellant, was at the date of the will his heiress and sole next of kin, and the person to whom undisposed-of realty, and undisposed-of personalty, other than that which a widow would take, would result. It is true that, at her death, other persons might have become interested; but testators do not generally look beyond the state of their families at the time. It is difficult to reconcile the gifts to the sister and to the wife, both of them apparently intended for maintenance, with a right, reserved to them, to a large undisposed-of residue. Again, if the wife was to marry, or mortgage her annuity, it was to fall into the residue; but of the residue, according to the Appellant's hypothesis, she would take one-half. Again, the real estate is apparently subject to a charge in favour of the testator's sister. But if she were to take the estate as heiress-at-law under a resulting trust, a charge in her favour would be unmeaning. Lastly, there is a devise, to the trustee of the will, of trust and mortgage estates. But this also would be more consistent with a construction which gave the testator's own real estate to George Arkle beneficially, than with one which would make the devise of all real estate to be a devise in trust.

My Lords, I have thus gone through the more minute details of this will for the purpose of pointing out that they appear to me to support the case of the Respondent rather than that of the Appellant; and as I think it cannot be shewn that the testator has used the words in the general gift to George Arkle, which I commenced by reading, otherwise than in their natural sense, according to which, I repeat, they import a beneficial gift, the case of the Appellant appears to me to fail, and the appeal, as I submit, and move your Lordships, ought to be dismissed, with costs.”

Lord Hatherley said at p627 and at pp631-632:

“Is he or is he not, intending by what he has done to give his property, both the realty and the residuary personal estate, after payment of debts and legacies, beneficially to the same person whom he has appointed as his executor and trustee? Now when a testator has provided, as the testator has done, most remarkably in this will, for his wife, for his sister (his presumptive heir-at-law), for his illegitimate children, and for his great nephew in Ireland, to whom he has given a considerable legacy, namely £2000; when he has provided for all of them, what is there to make it improbable, or anything out of the ordinary course of a testator's will, that this bequest, which undoubtedly was an absolute devise for these persons successively, not quâ executors or trustees but nominatim, should be with the intention of leaving (as he does) the whole of his real estate beneficially, and the residue of his personal estate beneficially, to them after the payment of his debts and legacies? …

My Lords, I fail to see in this case that any trust whatever is attached to that portion which is given to George Arkle. As in the legacy of £1000 he is simply called George Arkle, and not executor or trustee, so in the gift of the real estate he is simply called George Arkle. The real estate is devised to him, and no trust whatever is imposed upon him as to that; and as to the only remaining portion of the gift, it is not a gift of the whole personalty, but a gift of the residue of the personalty after the trusts of the will have been satisfied. It appears to me, therefore, that no part of the property comes to him as George Arkle by virtue of the gift until all the trusts of the will are exhausted, there being no trust at all as to the real estate, and as to the personal estate only the payment of debts, leaving the whole of the remainder to come to him in his personal capacity.

But, my Lords, the difficulty is extreme, as it seems to me, of holding (for it comes back to that point) that the testator, who has so carefully provided in his will for those who would be entitled to his personal estate, namely, his widow and his sole next of kin, a testator who has carefully provided against any imprudence on the part of that widow and his daughter with reference to the annuities which he has given to them, and which are to fall into the residue in case of their attempting to alienate them, should proceed afterwards, having provided an annuity only during that time for his presumptive heir-at-law, his sister Mary Williams, who was at that time of the age of sixty-nine, the testator himself being of the age of seventy-four, to give to George Arkle the whole of his real estate without saying one word about trust for her or for anybody else, without any apparent object in creating a trust, inasmuch as (as I have said) he has not mistrusted her. Is it likely that, having a perfect confidence in her, he should give the property to George Arkle (referring expressly to a debt of £2500 owing to his presumptive heir-at-law, and to another debt of £500 to her, which he states to be in his hands) subject to this trust, whereas she being heir-at-law and presumptive heiress of the whole estate, there was no need whatever of mentioning any charge that she had upon it, because she would be mistress of the whole property?”

Lord Chelmsford delivered a dissenting speech, in which he said of the will that “an air of trust pervades it throughout”. In the course of her submissions, which are summarised below, Ms Angus QC suggested that the same applies in the present case.

In Re Rees [1950] 1 Ch 204, the testator appointed a certain friend and his solicitor (thereinafter called his “trustees”) to be executors and trustees of his will. He devised and bequeathed the whole of his property “(subject to payment of my funeral and testamentary expenses and debts) unto my trustees absolutely they well knowing my wishes concerning the same and I direct them to permit my brother .... to have and receive the rents and profits of my property Vardre Clydach .... during his lifetime.” The will also included a charging clause authorising the solicitor and any professional person who might become an executor or trustee thereof to charge for professional services. The testator told his trustees when he made his will that he wished them to make certain payments out of his estate and to retain any surplus for their own use.

After the payments directed by the testator had been made, a substantial sum remained in the hands of the surviving trustee. Vaisey J held that the part of the estate not required to give effect to the testator’s wishes was undisposed of by his will and passed as on an intestacy.

The solicitor’s appeal was dismissed by the Court of Appeal, who held that on the true construction of the will the gift was a fiduciary one to the trustees and not a gift to them upon a condition; that evidence was not admissible to show that the trustees took not a trust estate but a conditional gift; and that, accordingly, subject to the specific purposes indicated by the testator, the estate was undisposed of by the will and passed as on intestacy.

Lord Evershed MR (with whom Cohen and Asquith LJJ agreed) observed at p208:

“It is right to say that ... the cases show that slight indications may well suffice to persuade the court that the intention of the testator was not to create a trust estate in the devisee but to give him a conditional gift”.

Lord Evershed MR then reasoned (among other things) as follows:

“I think that in this context, and in this will, the word "absolutely" should be construed not as conferring a beneficial interest but as defining the extent of the interest in the property given, so as to confer upon the trustees the property given to them - and I borrow the language used by Cohen LJ during the argument - free of any fetter which would prevent their carrying out his express wishes.” [pp208-209]

“But the matter does not end there, because the next phrase is, after referring to his wishes, "and [I] direct them to permit my brother .... to have and receive the rents. ..." [Counsel] said that the use of the word "permit" indicated something less than the obligation of a trust; but the phrase is not merely "to permit" but "I direct them to permit." I think that that is pre-eminently language which is apt to impose the obligation of trusteeship.” [209]

“In any case, if so far the balance be a nice one between the two alternatives, we then have to consider the effect of cl. 4, the charging clause, which is the longest clause in the will. I do not want to over-emphasize the significance of it. I have already said that this is pre-eminently a lawyer's will; and none but a lawyer, certainly, would have inserted a clause in this language. But it goes somewhat further than that, for on [Counsel's] construction the only possible effect that this substantial clause, occupying, as I say, about a third of the whole document, could have, would be to enable the plaintiff, the solicitor, to throw upon his co-trustee and supposed co-beneficiary, Tom Hopkins, one half of the costs which the plaintiff's firm would charge for carrying out the duties imposed on them - a result which I conceive would be the last thing that the plaintiff could have intended when he drew the will, or the testator when he executed it. I therefore come to the conclusion, agreeing with the judge on the first point, that this will, properly interpreted, confers on the two trustees an estate on trust and not a conditional gift.” [pp209-210]

Lord Evershed MR then turned to consider the second question raised by the appeal, namely whether evidence was admissible to show that, although the form of the will on its proper reading created only a trust estate in the trustees, it was the intention of the testator that they should take a beneficial interest. The Court of Appeal agreed with Vaisey J that such evidence was inadmissible, even if this might result in “having to come to a conclusion which probably defeated the wishes of the testator” (see p211).

Lord Evershed MR then observed as follows (at p211):

“… in the general public interest it is not to be forgotten that Parliament has laid it down that prima facie a will disposing of the property of a deceased person must follow certain strict forms. These courts have also been very insistent on the importance of the principle that those who assume the office of trustees should not, so far as they fairly can prevent it, allow themselves to be in a position in which their interests and their duties conflict. This is a case in which the will, as I have said, was drawn by a solicitor, or by a member of a solicitor's firm, and the claim is that that solicitor is entitled, either absolutely or jointly with another, to the whole beneficial interest. In the general public interest it seems to me desirable that if a testator wishes his property to go to his solicitor and the solicitor prepares the will, that intention on the part of the testator should appear plainly on the will and should not be arrived at by the more oblique method of what is sometimes called a secret trust.”

The 2004 Will was in the following terms:

“I, LUCIAN MICHAEL FREUD of 138 Kensington Church Street London W8 4BN REVOKE all former Wills and codicils made by me AND DECLARE this to be my last Will

1.

APPOINTMENT OF EXECUTORS

1.1

I APPOINT DIANA MARY RAWSTRON of 90 Fetter Lane London EC4A 1PT and ROSE PEARCE of 76 Englefield Road London N1 3LG to be the executors and trustees of this Will

1.2

In this Will the expression “my Trustees” shall mean my personal representatives and the trustees for the time being

2.

SPECIFIC GIFT

I GIVE my painting “Portrait of a Woman” by Corot to the National Gallery of Trafalgar Square, London WC2N 5DN

3.

PERSONAL CHATTELS

3.1

I GIVE all my personal chattels as defined by Administration of Estates Act 1925 s.55 except those which are the subject of specific gifts in this Will or any codicil to it but including personal chattels used partly for business purposes (“my Chattels”) to my Trustees

3.2

I REQUEST them but without imposing any binding obligation to give effect as soon as possible but not later than two years after my death to any written notes of wishes of mine with regard to the disposal of my Chattels whether such wishes are contained in any memorandum placed with this Will or found with my papers or indicated by words or marks on the Chattels themselves or communicated orally or expressed in any other way

3.3

Subject to such wishes my Trustees shall hold my Chattels or the balance of them as an addition to the residue of my estate

4.

COPYRIGHTS

4.1

I GIVE all copyrights in my artistic works and other related rights and privileges to my Trustees

4.2

I DIRECT my Trustees to give effect to the wishes I have expressed to them regarding requests to reproduce my artistic works and the exploitation of my copyrights and other rights in them and I DECLARE that my Trustees shall not be liable for any loss made in fulfilling those wishes

4.3

Subject to such wishes my Trustees shall hold such copyrights and other related rights and privileges and the proceeds of any exploitation of them as an addition to the residue of my estate

5.

TAX ON LIFETIME TRANSFERS

I declare that any inheritance tax that may become payable as a result of my death on a transfer of value made in my lifetime shall be payable out of the residue of my estate and such payment shall itself be free of inheritance tax

6.

GIFT OF RESIDUE

6.1

I GIVE all the residue of my estate (out of which shall be paid my funeral and testamentary expenses and my debts) and any property over which I have a general power of appointment to my Trustees ON TRUST to sell or retain it (and such estate and the property which currently represents it is referred to in this Will as “the Trust Fund”)

6.2

MY Trustees shall hold the Trust Fund on the trusts and with and subject to the same powers and provisions communicated before the execution of this Will to the persons named in clause 1 and set out in a deed already executed by me and them (which is not to form part of this Will)

7.

TRUSTEE POWERS

MY Trustees shall have the following powers:

7.1

to invest trust money and to vary and transpose investments from time to time with the same full and unrestricted freedom in their choice of investments as if my Trustees were a sole absolute beneficial owner

7.2

to apply trust money at any time and from time to time in the purchase or in the improvement of any freehold or leasehold dwellinghouse in any part of the world and to permit any such dwellinghouse to be used as a residence by any beneficiary upon such terms and conditions as in their absolute discretion my Trustees may from time to time think fit to require

7.3

to insure any asset in my estate on such terms as they think fit to pay premiums out of income or capital and to use any insurance money received to restore the asset or if this is not possible to apply it as if it were the proceeds of the sale of the asset

7.4

to exercise the power of appropriation under Section 41 of the Administration of Estates Act 1925 without obtaining any of the required consents even though one or more of them may be beneficially entitled and may for such purpose place such value on my property as they in their absolute discretion think fit

7.5

to take all actions and execute all documents necessary to ensure that the title to all land in my estate is effectively transferred to the person entitled and to pay all the consequent costs (including Land Registry fees) out of residue

7.6

in any case where my Trustees have any obligation or discretion under the provisions of my Will or under the general law to pay or apply income or capital to or for the benefit of any person who is a minor to discharge that obligation or to exercise that discretion if and whenever they think fit to do so by making payment either to the parent or guardian of the minor or else to the minor personally if of the age of sixteen years at least and so that their respective receipts shall be a full discharge to my Trustees who shall not be required to see to the application of any income or capital so paid

7.7

to hold all or any part of the Trust Fund in the name of one or more of the Trustees or of any other person or partnership as nominee, on such terms as the Trustees think fit

7.8

to engage any person or partnership as investment adviser to advise them on the investment of all or any part of the Trust Fund and they may, without being liable for any consequent loss, delegate to such investment adviser discretion to manage investments on such terms as the Trustees think fit

7.9

to amend or add to the administrative provisions of my Will by deed or deeds

8.

TRUSTEE CHARGING

ANY of my Trustees who is engaged in a profession shall be entitled to be paid fees for work done by him or his firm on the same basis as if he were not one of my Trustees but employed to act on behalf of my Trustees”

The Will was in the following terms:

“I, LUCIAN MICHAEL FREUD of 138 Kensington Church Street, London W8 4BN REVOKE all former Wills and codicils made by me AND DECLARE this to be my last Will

1.

APPOINTMENT OF EXECUTORS

1.1

I APPOINT DIANA MARY RAWSTRON OF 90 Fetter Lane, London EC4A 1PT and ROSE PEARCE of 76 Englefield Road, London N1 3LG to be the executors and trustees of this Will

1.2

In this will the expression “my Trustees” shall mean my personal representatives and the trustees for the time being

2.

SPECIFIC GIFTS

I GIVE free of tax to my assistant DAVID DAWSON of 14 Trevelyan Gardens, London NW10 3JY all my interest in the property known as 138 Kensington Church Street, London W8 4BN and the sum of TWO MILLION FIVE HUNDRED THOUSAND POUNDS (£2,500,000)

3.

PERSONAL CHATTELS

3.1

I GIVE free of tax all my personal chattels as defined by Administration of Estates Act 1925 s.55 except those which are the subject of specific gifts in this Will or any codicil to it but including personal chattels used partly for business purposes (“my Chattels”) to my Trustees

3.2

I REQUEST them but without imposing any binding obligation to give effect as soon as possible but not later than two years after my death to any written notes of wishes of mine with regard to the disposal of my Chattels whether such wishes are contained in any memorandum placed with this Will or found with my papers or indicated by words or marks on the Chattels themselves or communicated orally or expressed in any other way

3.3

Subject to such wishes my Trustees shall hold my Chattels or the balance of them as an addition to the residue of my estate

4.

COPYRIGHTS

4.1

I GIVE free of tax all copyrights in my artistic works and other related rights and privileges to my Trustees

4.2

I DIRECT my Trustees to give effect to the wishes I have expressed to them regarding requests to reproduce my artistic works and the exploitation of my copyrights and other rights in them and I DECLARE that my Trustees shall not be liable for any loss made in fulfilling those wishes

4.3

Subject to such wishes my Trustees shall hold such copyrights and other related rights and privileges and the proceeds of any exploitation of them as an addition to the residue of my estate

5.

TAX ON LIFETIME TRANSFERS

I declare that any inheritance tax which may become payable as a result of my death on a transfer of value made in my lifetime shall be payable out of the residue of my estate and such payment shall itself be free of inheritance tax

6.

GIFT OF RESIDUE

6.1

I GIVE all the residue of my estate (out of which shall be paid my funeral and testamentary expenses and my debts) and any property over which I have a general power of appointment to the said Diana Mary Rawstron and the said Rose Pearce jointly

7.

TRUSTEE POWERS

My Trustees shall have the following powers:

7.1

to invest trust money and to vary and transpose investments from time to time with the same full and unrestricted freedom in their choice of investments as if my Trustees were a sole absolute beneficial owner

7.2

to apply trust money at any time and from time to time in the purchase or in the improvement of any freehold or leasehold dwellinghouse in any part of the world and to permit any such dwellinghouse to be used as a residence by any beneficiary upon such terms and conditions as in their absolute discretion my Trustees may from time to time think fit to require

7.3

to insure any asset in my estate on such terms as they think fit to pay premiums out of income or capital and to use any insurance money received to restore the asset or if this is not possible to apply it as if it were the proceeds of the sale of the asset

7.4

to exercise the power of appropriation under Section 41 of the Administration of Estates Act 1925 without obtaining any of the required consents even though one or more of them may be beneficially entitled and may for such purpose place such value on my property as they in their absolute discretion think fit

7.5

to take all actions and execute all documents necessary to ensure that the title to all land in my estate is effectively transferred to the person entitled and to pay all the consequent costs (including Land Registry fees) out of residue

7.6

in any case where my Trustees have any obligation or discretion under the provisions of my Will or under the general law to pay or apply income or capital to or for the benefit of any person who is a minor to discharge that obligation or to exercise that discretion if and whenever they think fit to do so by making payment either to the parent or guardian of the minor or else to the minor personally if of the age of sixteen years at least and so that their respective receipts shall be a full discharge to my Trustees who shall not be required to see to the application of any income or capital so paid

7.7

to hold all or any part of the Trust Fund in the name of one or more of the Trustees or of any other person or partnership as nominee, on such terms as the Trustees think fit

7.8

to engage any person or partnership as investment adviser to advise them on the investment of all or any part of the Trust Fund and they may, without being liable for any consequent loss, delegate to such investment adviser discretion to manage investments on such terms as the Trustees think fit

7.9

to amend or add to the administrative provisions of my Will by deed or deeds

8.

TRUSTEE CHARGING

ANY of my Trustees who is engaged in a profession shall be entitled to be paid fees for work done by him or his firm on the same basis as if he were not one of my Trustees but employed to act on behalf of my Trustees”

In outline, Mr Furness QC submitted as follows:

With regard to what he understood to be the Defendant’s arguments in light of the correspondence which preceded the hearing, Mr Furness QC submitted as follows.

The first such argument is that the existence of the powers contained in the administrative provisions in clause 7 of the Will only makes sense if there is a trust of residue in respect of which these powers could be exercised, and that if the gift in clause 6 is a beneficial gift, they are otiose. With regard to that argument, Mr Furness QC submitted:

The second such argument is that the sub-clauses to clause 3 of the Will make no sense if the gift of residue is an outright gift to the Claimants. With regard to that argument, Mr Furness QC submitted:

The third such argument is based on the fact that the First Claimant was the testator’s solicitor. With regard to that argument, Mr Furness QC submitted:

Ms Angus QC developed her submissions that the Claimants’ construction of the Will is incorrect under three heads, as follows.

First, Ms Angus QC submitted that the wording used in clause 6 of the Will is as capable of meaning a gift to the Claimants on trusts as of meaning a gift to them beneficially for the following reasons:

Second, Ms Angus QC submitted that the other provisions in the Will support a conclusion that the gift in clause 6 was intended to be a gift to the Claimants on trusts as opposed to for their absolute benefit:

Third, Ms Angus QC submitted that the relevant factual context in which the Will was made and common sense both suggest that the testator intended the gift in clause 6 to be a gift to the Claimants on trusts rather than beneficially:

Because Ms Angus QC’s submissions were largely based upon expanding and refining points that had previously been raised on behalf of the Defendant in correspondence, to a substantial extent Mr Furness QC’s submissions answered them in advance.

However, with regard to the clauses in the Will, Mr Furness QC submitted further that:

With regard to Saltmarsh v Barrett 3 De G F & J 283 and Williams v Arkle (1875) LR 7 HL 606, Mr Furness QC began by accepting the statement of Lord Cairns LC in the latter case at p614:

“It is an undoubted principle of construction that where you find property given to one individual or more, and a trust is declared of a part, or a trust is declared which does not exhaust the whole of the property, there the creation of the trust is considered to be the sole object of the gift, and that which is unconsumed by the trust results to the representative of the donor.”

In substance, however, and by way of analogy, Mr Furness QC relied upon what Lord Cairns LC said next, at pp614-615:

“In the present case there are no trusts whatever declared of the real estate, and, so far as the trusts have to be answered out of the personal estate, these trusts are not founded upon, or to be answered out of, the gift of the residue, but are declared antecedently to the gift of the residue.”

With regard to Saltmarsh v Barrett 3 De G F & J 283, Mr Furness QC submitted:

With regard to Williams v Arkle (1875) LR 7 HL 606, Mr Furness QC submitted:

Ms Angus QC is right in saying (a) that the gift in clause 6 of the Will is not expressed to be a gift made to the Claimants “beneficially” or “absolutely”, (b) that the gift is made to the Claimants by name alone (and not by description, such as “solicitor” or “daughter”), (c) that the Claimants are the same persons who are appointed as executors and trustees by clause 1.1 of the Will, (d) that this is spelled out by the repeated use of the word “said” in clause 6, and (e) that the gift is made to the Claimants “jointly”.

In my judgment, however, neither separately nor cumulatively do these points answer or outweigh the essential point made by Mr Furness QC that the gift in clause 6 is expressed as a simple gift of residue, and that clause 6 contains no mention of a trust.

Pausing there to look for a moment beyond clause 6, and to seek to collect the testator’s intention from the words used not only in clause 6 but in the entirety of the Will, and to construe all the words used in the Will in context, I consider that the fact that the testator referred to the Claimants as “Trustees” in clauses 3 and 4 but referred to them by their names in clause 6 is more consistent with the construction that, under clause 6, he intended them to take personally and absolutely rather than as trustees.

Returning to clause 6, Ms Angus QC is right to submit that, at the end of the day, the subject matter of the gift in clause 6 of the Will is not only what remains of the testator’s estate after satisfaction of the legacies and payment of his funeral and testamentary expenses and debts, but includes also the chattels referred to in sub-clause 3.3, the copyrights given to the Claimants in trust under clause 4, and all the remaining property in the estate. However, I consider that Mr Furness QC is also right in saying that in clauses 3 and 4 the Claimants take in a fiduciary capacity, and not a personal one. This point is related to the different ways of referring to the Claimants that are used in those clauses on the one hand and in clause 6 on the other hand. In my judgment, these considerations support the Claimants’ case more than the Defendant’s.

Even if it is assumed in favour of the Defendant (although I do not decide that this is right) that the gift in clause 6 is subject to an express trust in light of (a) the words that appear in parenthesis in clause 6, further or alternatively (b) the provision concerning inheritance tax that is contained in clause 5, I do not consider that this leads to the conclusion that the Claimants took the entire gift as trustees. For the proposition that the fact that individuals are to receive the subject matter of the gift in a clause in a will in part as trustees is a factor which supports a construction that they took the entire gift as trustees, Ms Angus QC relied upon Saltmarsh v Barrett 3 De G F & J 283. However, each case falls to be decided on its own particular facts. I consider that there are very material differences between the facts of Saltmarsh v Barrett 3 De G F & J 283 and the present case, essentially for the reasons submitted by Mr Furness QC. I am of the view that this is not a factor which weighs heavily against other factors in the present case.

On the one hand, because one of the individuals upon whom clause 6 of the Will is expressed to confer a gift is the testator’s solicitor, and even more so because the Will was drawn by that solicitor or by that solicitor’s firm, I consider that the public interest considerations discussed by Lord Evershed MR in Re Rees [1950] 1 Ch 204 at p211 require the court to be vigilant before accepting that clause 6 means that the Claimants take as beneficial legatees. On the other hand, the law recognises secret trusts, it is common place for solicitors to be appointed as trustees, and one reasonable explanation for a clause which confers a beneficial gift on a solicitor is that the testator intended to impose a fully secret trust. In the present case, it is the Claimants’ evidence that the gift of residue is indeed subject to a trust under which the First Claimant does not stand to benefit. It was not suggested that I should not have regard to this evidence, and, while I do not consider that it is admissible as an aid to construction, it seems to me that it meets the public interest considerations on the facts of this particular case.

The Defendant also argues that the facts that the Claimants comprise the testator’s solicitor and only one of the testator’s living issue at the time the Will was made suggest that the gift in clause 6 is intended to be a gift to the Claimants on trusts rather than beneficially. As to that, I agree with Mr Furness QC that to uphold this argument would make the use of professional persons to be fully secret trustees difficult if not impossible, and, moreover, that these facts are insufficient to warrant reading clause 6 of the Will as imposing an undefined trust on the residuary legacy. In short, even if it may be reasonable to suppose that the apparent beneficiaries in accordance with a will have secretly acquiesced with the testator to hold the residuary legacy on trusts, that does not mean that those trusts are referred to in (but not defined by) the will, or that the apparent beneficiaries are mere trustees in accordance with the terms of the will.

Accordingly, I do not consider that these further points concerning clause 6 assist the Defendant.

I consider that the rival arguments concerning clauses 3.3, 7 and 8 of the Will are in many respects quite evenly balanced. In my judgment, however, the points that matter in this regard are as follows:

This brings me to a striking feature of the present case, namely that the Will that I have to interpret revoked the 2004 Will, which contained a differently worded clause 6 which was plainly intended to create, and appears effective to have created, a half secret trust. The factual context to which (I believe) both sides agreed that I could have regard included these matters, the fact that Lucian Freud’s residuary estate was likely to be very substantial, and the fact that Lucian Freud was professionally advised by solicitors, by whom both Wills were drawn. In my judgment, the only reasonable conclusion to be drawn from this change of wording is that Lucian Freud did not intend to create a half secret trust by clause 6 of the Will. If that had been his intention, it is difficult, if not impossible, to see why, with the advantage of professional legal advice from the same solicitors who had drawn the 2004 Will, he did not use either the same words as he had used in the 2004 Will or at least clearer words than he used in the Will.

In my judgment, in light of this background, and whatever may be the position with regard to other testators, when considering the significance of this change of wording it is unrealistic to suggest that Lucian Freud did not have an appreciation of secret trusts.

These facts are peculiar to the present case, and distinguish it from the authorities cited above. Even if I had not been prepared to decide, as I have, that the Claimants’ interpretation of clause 6 of the Will is to be preferred to that of the Defendant having regard to all the other points discussed above, I would have reached that conclusion in light of these particular features of the factual matrix in the present case.

I can readily understand, from his personal point of view, why the Defendant has been reluctant to accept the Claimants’ interpretation of clause 6 of the Will. It is a pity (although I intend no criticism of anyone in saying this) that a way could not be found without trespassing on the Claimants’ areas of concern to demonstrate to him that he stands to gain nothing from this litigation. In addition, no matter how honest and well-meaning a solicitor may be, this does not guarantee that the solicitor’s evaluation of any particular question of mixed fact and law is correct. In the present case, however, the First Claimant is an experienced former partner, now a consultant, in a reputable firm, who has stated in a witness statement verified by a statement of truth that even if the Defendant’s construction of the Will is correct the gift of the residuary estate would still be subject to a valid half secret trust of which he is not a beneficiary. It would be a strong thing for such a statement to be made without proper foundation. Moreover, as this case has been presented by Mr Furness QC who has had conduct of it for some time, it is to be inferred that this evidence would not have been put forward unless he considered that it was true. For these reasons, although this obviously forms no part of my reasons for ruling as I have, I doubt that the Defendant has lost anything as a result of my decision.

In summary, in the light of (a) the natural and ordinary meaning of the words used in clause 6 of the Will, (b) the overall purpose of the Will, (c) the other provisions of the Will, (d) the material factual matrix when the Will was made and (e) common sense, I consider that the Claimants’ interpretation of clause 6 of the Will is to be preferred to that suggested by the Defendant. The claim therefore succeeds. Counsel should agree a form of order. I will hear submissions on any points on which they are unable to agree.