Diana thought al-Fayed was bugging yacht - sister

LONDON - Princess Diana thought luxury store owner Mohamed al-Fayed was spying on her during her last voyage on his yacht before she died in a Paris car crash, her sister told the inquest into Diana's death on Monday.

Diana and Mohamed al-Fayed's son Dodi were killed in a high-speed crash in a Paris road tunnel in August 1997 while being chased by paparazzi desperate to capture a shot of the world's most photographed woman.

A woman looks at images of the late Diana Princess of Wales by photographer Mario Testino, on exhibition at Kensington Palace, London in this November 22, 2005 file photo. (REUTERS/Stringer)

Just days before she was killed, Diana rang her sister Sarah from the yacht Jonikal while on holiday in the Mediterranean.

When asked by lawyer Ian Burnett if Diana had talked about being bugged, Sarah McCorquodale said "She thought the boat was being bugged by Mr al-Fayed Senior."

Mohamed al-Fayed alleges that Dodi and Diana were killed by British security services on the orders of Prince Philip, Queen Elizabeth's husband and Diana's former father-in-law.

Fayed believes her killing was ordered because the royal family did not want the mother of the future king having a child with his son. He alleges that Diana's body was embalmed to cover up evidence she was expecting a baby.

But McCorquodale said she got the impression that Diana's summer romance with Dodi al-Fayed was on its last legs.

"I just did not think the relationship had much longer to go," she told the court. No mention was ever made of Diana being pregnant or getting engaged to Dodi.

Instead, she thought her sister might have wed heart surgeon Hasnat Khan.

"I believe there was a strong possibility that they might have married," she said.

"I don't think she believed the relationship was ended or she hoped it wasn't," McCorquodale added.

After Diana's death, McCorquodale and her mother Frances Shand Kydd spent several days shredding confidential documents at her Kensington Palace home in London.

"Nothing historical was ever shredded," according to McCorquodale who said she never saw any letters from Prince Philip to Diana.

She said she agreed with her mother to destroy anything that might in future distress Diana's sons, Princess William and Harry.