A Fairy-Tale Gone Sour

Vianden Castle, located in the north of Luxembourg looks like it came straight from the pages of a fairy-tale.  In fact, much of this tiny landlocked country seems to beautiful to be true, from its outstanding natural beauty to the Michelin-starred restaurants.

Until recently, the life of Princess Tessy of Luxembourg also seemed to resemble that of a fairy-tale.  A girl from a humble background meeting a handsome prince and living happily-ever-after with two children.  Unfortunately, in Princess Tessy’s case, the fairy tale appears to have turned sour.  She and Prince Louis of Luxembourg, the third son of the Grand Duke Henri and Grand Duchess Maria Teresa of Luxembourg spent most of 2018 slugging out a financial settlement in the Family Division of the High Court.

The situation illustrates how complex a financial settlement can become in high-net-worth divorce cases.

Reporting restrictions

In December 2017, the court made a reporting restrictions order covering the financial remedies proceedings the couple. It prohibited the publication of any information relating to the former matrimonial home and the terms of any settlement offer.

The case concerning the reporting restrictions came about after Princess Tessy was subjected to unfavourable press coverage which branded her a ‘gold digger’.  The Luxembourg magazine, Privat, ran a particularly vicious piece which concluded that “she’ll always remain the daughter of a roofer”.

The Princess wished to respond to media attacks by making public the terms of an open offer which she had made to the husband and certain information concerning the former matrimonial home.

In making the decision to restrain publicity, the Court had to balance each parties’ rights under the European Convention of Human Rights (ECHR), including Article 8 – the right to family and private life.  Although the parties were members of the royal family, they had no official public role in Luxembourg and were, therefore, private individuals rather than public servants. The right to respect for private life was of importance to both parties in circumstances where they were engaged in financial remedy proceedings as it was important that negotiations could take place without disruption from external influences.

Although preventing Princess Tessy from publishing information regarding any settlement offer infringed on her right of freedom of expression, this was outweighed by the right to her husband’s respect for private life. In addition, there was a need to protect the administration of justice by ensuring that parties to financial remedy proceedings could negotiate confidentially, without the disruption of external influences.

The ownership of the family home

In December 2018, The Hon. Mr Justice McDonald was asked to determine ownership of the couple’s former matrimonial home.  The TR1 form (the document which transfers ownership from the seller to the buyer), listed Prince Louis and his father, the Grand Duke, as legal owners, with an express declaration of trust in favour of themselves as joint tenants.

Prince Louis alleged that the entire beneficial interest in the family home was owned by a third party, as the property was purchased by an entity which administered the funds for the Grand Duke, L’Administration Des Biens De S.A.R Le Grand Duc De Luxembourg (“the ADB”).

Justice McDonald stated that Prince Louis and the Grand Duke could not create an express trust by stating on the TR1 form that they held the property on trust for themselves because the beneficial interest had always belonged to the ADB under the doctrine of resulting trust.  ADB supplied all the funds for the purchase and evidence showed the Prince and Grand Duke intended ADB to retain a beneficial interest in the family home.  In addition, the property was not purchased to provide a couple buying a home for themselves; the monies from ADB were not a loan or a gift.  Instead, ADB acted as a purchaser.

Justice McDonald ruled that for the reasons stated above, the resulting trust in favour of ADB overrode the express trust in the TR1 form.

The settlement

Prince Louis was ordered to pay £4,000 per year for each of the couples two children.  The judge also ordered the princess and children should be given a ‘licence to occupy’ the former family home in London “until the youngest child finishes his first degree”.  Princess Tessy initially asked for a £1.5 million lump sum plus money to buy a family home and a car.  She argued that her husband’s family would assist him with paying the financial settlement.  However, Justice McDonald ruled “’it would be wrong in this case to conclude that the husband’s family represent a financial resource on which this court can rely”.

After the ruling, Prince Louis gave credit to his wife, stating she had undertaken her role with “grace” and “represented my family well”.

Princess Tessy is considering appealing the decision.

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