L'Oréal heiress Liliane Bettencourt loses control of her fortune

Bettencourt declared mentally unfit to run her own affairs and put under family protection

Liliane Bettencourt, the L'Oréal billionaire and France's wealthiest woman, was yesterday declared to be suffering from dementia and placed under the protection of her daughter and grandsons, even though she had described such a scenario as her "worst nightmare".

The court ruling follows a long family quarrel and legal battle between Ms Bettencourt, 89 this week, and her only daughter, Françoise Bettencourt-Meyers. The two-year dispute has already spawned a series of lurid judicial and political scandals that have embarrassed President Nicolas Sarkozy.

Ms Bettencourt, whose fortune is estimated to be about €18bn, told a newspaper earlier this month that she would rather die or "go and live abroad" than be placed under the "suffocating" care of her daughter. A court in the Paris suburbs nevertheless decided yesterday that Ms Bettencourt was suffering from a form of Alzheimer's disease and could no longer manage her own affairs. She was made a ward of her eldest grandson, Jean-Victor Meyers, 25, and her fortune, including a majority interest in the cosmetics giant L'Oréal, was placed under the control of her daughter and two grandsons. Ms Bettencourt's lawyers said they would appeal against what they described as a "profoundly disappointing" ruling.

The saga began two years ago when Françoise Bettencourt-Meyers began a legal action to remove her mother from the influence of a photographer, François-Marie Banier. It emerged that Ms Bettencourt had given Mr Banier more than €1bn in art works and life insurance policies.

The dispute appeared to have been resolved amicably last year when Mr Banier agreed to give back most of this and Ms Bettencourt agreed to resume friendly relations with her daughter. But the accord disintegrated. Ms Bettencourt-Meyers brought a new legal case alleging that her mother had fallen under the undesirable influence of her advisers.

The original dispute generated a series of interlocking political and judicial scandals which have acquired a life of their own. Ms Bettencourt was bugged by her own butler, who said that he wanted to gather evidence that she was being swindled.

A lengthy transcript of her private conversations was leaked to the press. It suggested that she might have given illegal campaign funds to politicians, including the 2007 presidential campaign of Nicolas Sarkozy. The Elysée Palace has since been accused of illegally using the French internal security services to spy on journalists to try to block leaks in the Bettencourt affair. The head of the French internal security service, Bernard Squarcini, was placed under formal investigation by a judge yesterday for his alleged part in the affair.

Earlier a court at Courbevoie, west of Paris, received a medical report which suggested that Ms Bettencourt was suffering from "dementia, a moderately severe form of Alzheimer's disease and a slow, degenerative brain condition".

In an interview with the Journal du Dimanche, Ms Bettencourt said that her "worst nightmare" would to be placed under the control of her daughter. "If that happens, I'm going abroad," she said. "If my daughter was in charge of me, I would suffocate...I would have no more desire to live."

Ms Bettencourt-Meyers' lawyers issued a statement saying the ruling would make no difference to the future of L'Oréal, amid rumours that Nestlé, a major shareholder, would seek to swallow up the company.