Henry Freeman was the sole survivor after his lifeboat capsized and was awarded a silver medal for his bravery.
The lifeboat disaster happened in 1861, Henry Freeman survived as he was the only crew member wearing the new style of cork lifejacket. He went on to save many more lives at sea.
A life size wire sculpture Henry Freeman will be installed near a planned commemorative garden in the town celebrating 200 years of the RNLI.
The Khyber Pass area, adjacent to the lifeboat museum and shop, is currently an unused grassy area but will be transformed this year by North Yorkshire Council.
Station mechanic, Richard Dowson had the idea for the sculpture after seeing a trail of similar work around the town that celebrate the Whitby's heritage, created by artist Emma Stothard.
The area where the sculpture will stand is particularly poignant as it is the site of the town's first lifeboat station in 1802, before it was demolished to create a road in 1842, and moved to what is now the lifeboat museum.
Richard Dowson, Whitby RNLI station mechanic said:
'Henry Freeman is not only a big part of the RNLI's history but the town's too. I hope people will pause at the sculpture, look across the harbour and enjoy it as a place of reflection.
I can only imagine what Henry would think if he could see how the town has changed, and how much the lifeboat technology has advanced since the day's of the old rowing lifeboats, we think he would be proud of his legacy and that there is still a crew of volunteers in Whitby today.'
He added:
'We would like to thank Lesley for her kind donation, to say we are over the moon is an understatement.'
Lesley Jackson nee Freeman has her own charity named after Henry Freeman that supports young creative people on the coast, the Freeman 1st Foundation.
Lesley said:
'I felt compelled to make this personal donation when I read about the RNLI's plans. How better to help celebrate the brave people who save lives at sea than by creating a permanent reminder of one of the bravest.'
Artist Emma Stothard who has begun creating the sculpture in her Whitby studio said:
'I am absolutely honoured and thrilled to be creating a life size sculpture of Henry Freeman in celebration of the RNLI’s 200th anniversary here in Whitby.
Thanks to the wonderful photographs by Frank Meadow Sutcliffe I can recreate in detail the lifesaving cork life jacket and clothing he wore. I hope visitors will enjoy learning more about how the RNLI here in Whitby changed the course of history in saving lives at sea.'
The sculpture is expected to be installed later in the year. Other local businesses have offered to help with the installation costs of the sculpture including Neil Trillo.
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