Executors of Bernard Matthews v Matthews
As paragraph 2 of the judgment (September 5 2012, see link to the law report below) says: ‘Mr Matthews was the founder of a very successful turkey farming and food production business which grew into a household name. His memorable advertisements of its products can still be seen on YouTube.’
The personalities and facts of this case would make it worth reading but, in addition, it has two really interesting legal points, one on construction and one on election. Matthews died, survived by his wife Joyce, their three adopted children (‘the adopted children’), and a son (‘George’) by a different woman. He had been separated from his wife for nearly 30 years by the time of his death. For about 20 years he had been living with the second defendant (‘Odile’).
They lived together in England and in a villa in the South of France (‘the French villa’), which he had bought shortly before he met her. It was worth €15m at the date of death.
Matthews left the French villa outright to Odile together with his French moveable property. In a separate English will he left £1m free of tax to Odile and his residuary estate (worth about £40m) on trust for George. By clauses 4 and 5 of his English will, Matthews provided that his executors should pay from residue all tax ‘of whatever nature and wherever arising which becomes payable in any part of the world (including France) as a consequence of my death’.
Matthews was aware that, by French-forced heirship rules, his children were entitled to 75% of the French villa, so that, save to the extent that they gave up their rights, he was free to leave only 25% of it to Odile. He hoped nevertheless that his children would not exercise their rights, and left a letter to that effect. However, while George (who was taking the residue of the estate) respected his wishes, the adopted children (who took nothing under the will although they had received assets by lifetime transfer) did not, with the result that Odile could only inherit 43.75% of the French villa.
The adopted children, having disregarded Matthews’ wishes by exercising their rights under French law to a total share of 56.25% of the French villa, also claimed to be entitled, under clauses 4 and 5 of his English will, to have their liability for French inheritance tax discharged by the executors from the English estate.
The construction problem
A direction to pay tax from residue on property that would otherwise bear its own tax is a legacy. The question was how clause 5 should be construed. Was it intended as a legacy to Odile to discharge her liability to tax, or did it extend to the tax payable by the adopted children (who had gone against their father’s wishes)? Nicholas Strauss QC referred to the modern approach to construction of wills, which is that the principles governing the construction of contracts apply equally to wills.
In relation to construction of contracts Lord Hoffman said in Investors Compensation Scheme v West Bromwich Building Society  1 WLR 896 at pp912-3: ‘Almost all the old intellectual baggage of "legal" interpretation has been discarded… Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract…The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.’
In Thomas v Kent  EWCA Civ 1485 at paragraph 17, Chadwick LJ cited that passage and said it applied equally to the construction of wills. Strauss said that modern principles of construction imply a term into a contract if that is what a reasonable observer, with knowledge of the relevant facts would understand the contract to mean. This may be necessary where the parties have not thought through the possible issues.
In light of these principles, construction of the will was straightforward. It was inconceivable that Matthews, who was fully aware of the risk of his children exercising their French law inheritance rights, could have intended that, if they did so contrary to his wishes, they should also be paid the tax, for which they alone were liable, out of his estate. He could not have thought through the tax position which would arise under the will if his children or any of them disregarded his wishes. Therefore the correct construction of clauses 4 and 5 was that they applied to tax payable as a consequence of his death by the executors or by beneficiaries under the will.
This is a helpful summary of the correct modern approach to construction. Just a word of caution – where, as here, there is abundant evidence of the background to the making of the will and the state of the deceased’s knowledge, it is easier to question the apparent meaning of the words used than in a case like Sharp v Pritchard  EWCA Civ 1474 (the RSPCA nil-rate band construction case) where there was no such information available to the court. Another reason for full attendance notes.
As he found that the adopted children received nothing under the will, the question of election became irrelevant. However, the judge considered it in case he was found to be wrong on the earlier issue. Odile argued that if the adopted children did benefit under the English will, the doctrine of election would require them to use that benefit to compensate her for the loss of the assets left to her by the French will as a result of the exercise of their forced heirship rights. She relied on the decision in Re Ogilvie  Ch 492, in which the doctrine of election was applied in a forced heirship context.
The judge reviewed the basis of the doctrine of election and concluded that, while it was open to criticism, its basis was equitable principle. This was a case where equity should intervene. The adopted children could not ‘in good conscience’ keep the benefit to which they were entitled under the English will.
Professor Lesley King, College of Law