Diana, Princess of Wales, thought that she was being bugged by Mohamed Al Fayed as she cruised on the Harrods owner’s yacht in the Mediterranean, her inquest heard yesterday.

Lady Sarah McCorquodale, the Princess’s sister, told the jury at the hearing that Diana had expressed her fears in a telephone call when she was a guest of the Fayed family shortly before the fatal crash in a Paris underpass in August 1997.

In the last call to her sister, hours before her death, the Princess had been distraught about the publication of an interview she gave to the French newspaper Le Monde on her landmines campaign, complaining that she had been misquoted and made to look as though she was criticising Tony Blair’s Government.

Her sister suggested that the Princess should discuss her concerns with Dodi Fayed, with whom she had developed a relationship and to whom, the Fayed camp claim, she was about to become engaged because she was pregnant with his child. “She said that would be a waste of time,” Lady Sarah said. “From that I just didn’t think the relationship had much longer to go.”

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The Princess had never mentioned pregnancy, engagement or gifts from Dodi; she would never have made an impulsive decision without discussing it with her two sons face to face, Lady Sarah said. For several years after her separation from the Prince of Wales Diana had suffered mood swings, with more troughs than peaks, but after her divorce she had become much more focused: “She knew what she wanted to do. The boys were happy, sorted. It was time to go forward.”

Referring to the Princess’s previous relationship with a Pakistani heart surgeon, Lady Sarah said: “I believe there was a strong possibility that she and Hasnat Khan might have married. But he couldn’t take her lifestyle; he was a very committed surgeon. I don’t think she believed the relationship had ended; she hoped it hadn’t.”

The Princess told her sister that she had arranged for her Kensington Palace apartments to be swept for bugging devices, although the inquest has already heard that nothing definite was found, despite suggestions that she was being monitored by the British security services. Apart from that, Lady Sarah said, she had never expressed fears for her own safety, as she is alleged to have done in a note to Paul Burrell, her butler.

During yesterday’s hearing Lord Justice Scott Baker, the coroner, shared the bench of Court 73 at the Royal Courts of Justice with a stout wooden document box, in which the Princess is said to have kept sensitive correspondence and which may or may not have contained letters from the Duke of Edinburgh, whom Mohamed Al Fayed maintains was the mastermind behind an assassination plot.

The letters have never been seen but Michael Mansfield, QC, for Mr Al Fayed, spent most of yesterday in a determined but unsuccessful attempt to locate them. Lady Sarah said that she had never seen the alleged letters but had heard of them. She thought that, if they existed, they might be at Althorp, the Spencer family home in Northamptonshire. An offer to search for them was accepted by the coroner.

The Princess’s relationship with the Duke of Edinburgh was good, Lady Sarah believed, and she also had a very fond relationship with the Queen. At the end of her life she was even on good terms with her ex-husband.

Mr Al Fayed’s legal team believe that letters from the Duke, assumed to be uncomplimentary, could be essential evidence in their conspiracy theory. Frances Shand Kydd, Diana’s mother, spent days at Kensington Palace shredding documents, but Lady Sarah did not believe she had destroyed anything of historical value.

Richard Keen, QC, for the parents of Henri Paul, the driver of the car, who was also killed, picked up Lady Sarah’s admission that she had opened the box after her sister’s death and given its contents to Mr Burrell for safekeeping. “You opened Pandora’s Box, let out all the ills of the world, and gave them to the butler,” he charged. Lady Sarah maintained that, whatever was in the box, “there were no letters from the Duke”.

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