French trust reflections

Fri 11 December 2020, Philippe Ropenga Estate management negotiorum gestio

The partner of the deceased has taken care of him and his home for sixteen years, doing the garden, the shopping and the meals. She has bought a car paid by the deceased and has been freely using it while the deceased did not drive it at all. Several relatives of the deceased have testified that she has assisted the deceased with dedication. She withdrew €1.500 from the deceased bank account on the day of his death.¹. An heir brought a claim against the partner i.a. on the ground of unjust enrichment against the partner.² Regarding the expense made to purchase the car, the appeal judges have reminded the heir that no unjust enrichment could take place when a person made an expense to fulfil his obligation or to make a gift. The deceased has not signed anything regarding a debt to his partner. Do you remember the post on natural obligations and resulting trusts?³ Yes, you do. I thus can explain the legal reasoning. The Court of Appeal noted that the partner had used the car i.a. to drive the deceased to healthcare professionals since he had not been driving for many years. Hence, she has used the car for his profit as well. The Court dismissed the heir's argument regarding the fact the deceased paid his natural obligation off by housing his partner for free. The court has found the housing costs have been trivial compared to those of a home nurse and home helper and went further noting the that the cost of the car, i.e. €14.799,80, amounted to a monthly reward of €77,08 over sixteen years. The Court of Appeal has followed the lower court and has dismissed this claim. Regarding, the withdrawal of €1.500, the partner argued that she has been instructed to reimburse a debt by the deceased and acted on the basis of negotiorum gestio⁴. She could however not produce any piece of evidence supporting her claim. Once again, the appeal judges followed the court of first instance and granted the restitution claim brought by the heir.

As one can see, French legal relationships within the field of droit patrimonial that is equivalent to the field of trusts and estates are more flexible than they seem from an Anglo-Saxon perspective. This flexibility also affects legal structures.

Legal structures are useful since one person may hold the legal title and consider acting with others or manage the estate in a way that affects third parties.⁵ Usufruct is a Roman legal technique that allows a person to enjoy a piece of property and its income, and to bring a claim against the owner who troubles his quiet enjoyment. Usufruct respects the integrity of the legal title and the powers of the person who holds it. It has been seen on this blog that matrimonial regimes were not of Roman origin and allowed a spouse to oblige the other spouse towards creditors by exposing the property contained in his personal vessel. This customary law clearly wrecks the protection of the legal title derived from Roman law.⁶ Incorporation is interesting when dealing with a family business. Article 619 of the civil code provides that the right of usufruct held by a legal person cannot exceed thirty years. This is a major downside when one considers estate planning across generations. French case law recognises rights of enjoyment that have not been introduced by statutory law. This largely undermines the numerus clausus of property rights. The Cour de cassation that is the supreme court that deals with, civil, commercial and criminal matters has even allowed to create rights that are not general such as usufruct in the sense that they cover any enjoyment of the piece of property but specific enjoyment rights (droits réels de jouissance spéciale) that may cover only a specific use that has been contractually defined . Hence, it is important to distinguish between general enjoyment and specific enjoyment because it seems difficult to ask a court to set the civil code aside when a general enjoyment right is already described by the civil code, especially when the application of the newly created right is more tax efficient than that of the codified right. One may for example create an enjoyment right and grant it to a family business to avoid the thirty-year duration period.⁷ There are doubts as to perpetuity of these specific enjoyment rights and no one knows exactly how French tax administration will consider them.⁸ Practitioner should therefore be extremely cautious when creating these rights. Cases are only used here to illustrate a trend, not to promote a new legal institution that requires bespoke estate planning to avoid adverse consequences. It however is interesting to remember debates about the nature of these uncodified rights and perpetuity that have also arisen in jurisdictions of Equity.

In brief, when one looks at apparently loosely related issues side by side, one can see that trends that have been noticed on this blog several years ago are developing at an unexpected pace.

I wish you a peaceful winter and I hope that your loved ones will be able to join you for Christmas. I wish you a Healthy and serene New Year.

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