Fayed 'said from the start that Diana and Dodi were murdered'

Questioned later about his assertion, the Harrods tycoon is said to have referred to a mysterious conversation he had with the princess in St Tropez – when she complained about "things that happened with her in the UK".

The claims were revealed as the inquest into Diana's death was told she and Dodi were planning to marry and live at the villa in Paris where the Duke and Duchess of Windsor – Edward VIII and Wallis Simpson – made their home after the king abdicated in 1936.

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Franz Klein, president of the Al Fayed-owned Ritz Hotel in Paris, said Dodi had bought an engagement ring for Diana and issued instructions for the Villa Windsor to be prepared astheir marital home. Mr Klein, who is known as Frank, told the inquest at the High Court in London how he phoned his boss to deliver the news of his son's death after learning of the crash at 12.30am on August 31, 1997.

"I said, 'Mr Fayed, very sorry to disturb you, there has been a terrible accident Dodi passed away and the driver', and Mr Fayed said, 'Sorry'.

"Mr Fayed said, 'What about the princess?' and I said, 'The information I have is she's alive', the only thing I knew, and I said, 'an accident', that I said definitely.

"Mr Fayed, very calm, said to me, 'Frank, this is not an accident, this is a plot or an assassination'.

"I said, 'You cannot say that, it's an accident' and he said, 'Frank, I know more than you know, more than you think'.

"Then I think the conversation was over."

When Mr Klein later asked Mr Al Fayed why he thought the couple had been murdered, the tycoon referred to a conversation he had with Diana when she talked about "things that happened with her in the UK".

Mr Klein said he was phoned on August 14 by Dodi, who announced his plans to get engaged.

On August 18, Dodi called again from Monte Carlo about some jewellery he wanted.

Mr Klein said: "I remember very well he called me and he said, 'Frank, I just passed by a jewellers' shop'.

"He pointed out that it was Van Cleef and he said, 'I want to buy some jewellery. I am getting engaged'."

On August 29, Dodi is said to have called Mr Klein to instruct him about the Villa Windsor, in the Bois de Boulogne, which was on a 50-year lease to his father from the French government.

"He informed me he was going to Paris the following day," said Mr Klein.

"He did not mention the princess by name, but he did tell me that he was going to stay in Paris, to live.

"He told me he was going to move to the Villa Windsor with his girlfriend and he told me, all the time in English, that they were going to get married.

"The words from Dodi were very clear, he said that I am coming to Paris and I am coming with my friend,my girlfriend, and I am going to get married and I am staying and I am going to live there."

Because the 14-room villa was being renovated, Mr Klein said he would arrange a portfolio of suitable properties where the couple might live in the meantime.

The jury were shown a fax to the Ritz on August 23 which detailed several rings andwatches Dodi was interested in.

But it did not include the £11,600 Dis-Moi Oui – "Tell Me Yes"- ring, which Dodi is said to have later bought from another jewellers in Paris hours before the crash.

The engagement ring, paid for by Mohamed Al Fayed, was recovered from Dodi's apartment in Paris after the accident, although the court has seen no evidence to suggest he presented the ring to Diana.

The day after the crash, Mr Klein said he was at the morgue inParis attending Dodi's body when he was told by John Macnamara – Mr Al Fayed's head of security – that Scotland Yard were investigating, as the crash was considered "suspicious".

A month or two later, a woman claiming to be an aunt of a male nurse at the hospital where the princess lost her fight for life, phoned him suggesting Diana had been pregnant.

But the claims were never verified because the caller subsequently left for the West Indies.

Mohamed Al Fayed insists Dodi and Diana were murdered because they were about to announce their engagement and she was expecting his child.

But the princess's family and friends have dismissed any suggestion of an engagement and the coroner Lord Justice Scott Baker has warned the jury to "consider carefully" any evidence of an imminent announcement.

Yesterday Richard Horwell QC, for the Metropolitan Police, disputed the engagement claim, pointing out that Dodi had recently been engaged to the American model Kelly Fisher.

The hearing continues.