War over Diana dolls

Princess Diana's family were today locked in a bitter war of words over a multi-million-pound court battle. Diana's sister Lady Sarah McCorquodale has taken the unprecedented step of strongly criticising lawyers who advised her to sue a US company over protecting Diana's image.

Lady Sarah blames the legal team for advising her to pursue the action against American firm The Franklin Mint, which produced dolls of the princess.

She is poised to give evidence in a dramatic court case scheduled to start in America tomorrow that could cost the Diana, Princess of Wales Memorial Fund millions of pounds.

Official documents obtained by the Evening Standard show the true sense of bitterness Diana's older sister feels towards law firm Mishcon de Reya - where Diana's divorce lawyer and friend Anthony Julius was a senior partner.

She also says, in the papers before the court, that at the time the decision to litigate was made she was still wrapped up in her own "grief and loss", and was distracted by the difficulties of administering Diana's estate.

Lady Sarah, who lost her mother Frances Shand Kydd this summer, said in her testimony that she "relied heavily" on the legal team because the Memorial Fund was formed so quickly after the princess's death.

The fateful decision by the fund to enter the dangerous waters of United States litigation has put the future of all its good causes, and 500 jobs, in doubt.

Its failed legal battle to stop The Franklin Mint using the princess's name cost the Diana, Princess of Wales Memorial Fund ?4 million. Now the fund has been hit by a ?15 million countersuit for "malicious prosecution". If the fund loses the case, the bill could cripple its activities.

THE hearing could be televised worldwide if the BBC wins an application to broadcast proceedings, attracting a huge audience still hungry for anything to do with Diana. In a sworn statement to Los Angeles Superior Court, Lady Sarah states: "The trustees, including myself, were reluctant to litigate, especially in a foreign country.

"But for the very strong advice we received from a variety of lawyers in the US and UK we would not have pursued such an action."

In particular, she says the trust was urged to sue by Mishcon de Reya.

She continues: "Because the fund was formed so quickly, with so little infrastructure, and the trustees such as myself were simultaneously occupied with our own grief from our loss, as well as the complicated details of administering the princess's estate and addressing the many public demands required by the death of someone of her stature, it seemed appropriate to give wide authority to Mishcon to represent the interests of the fund broadly." She said that authority included "identifying and investigating what if anything should be done to protect the Fund's rights in the princess's intellectual property.'' She insists that the Diana fund was told it had a strong case for suing the Franklin Mint both by Mishcon de Reya and by its American lawyers. At the time Lady Sarah and Mrs Shand Kydd - both executors of Diana's estate - were seen as the driving force in the transatlantic legal battle.

The legal row began in 1998, when the fund objected to a Diana souvenir doll produced by The Franklin Mint. It rejected a licensing deal with the Pennsylvania-based company, which offered to donate a percentage of the profits to the charity. But the fund described the firm's owners Stewart and Lynda Resnick as "vultures feeding on the dead".

Lady Sarah is one of a number of the princess's inner circle ready to give evidence in the countersuit.

Others include her former friend and writer Vivienne Parry, the fund's chief executive Dr Andrew Purkis, and Mr Julius, who handled the princess's divorce and helped set up the trust.

Potential witnesses include Meredith Etherington-Smith, a friend of Diana's who handled the 1997 sale of her gowns for Christie's in New York, and Lord Cairns, another trustee of the fund.

In his statement, Christopher Spence, the chairman of the Diana fund, also blames the lawyers for the decision to sue. "I am not a lawyer - and have no knowledge of Californian and US intellectual property law," he says. But he adds that legal advice led him to believe "the claims were all valid ones." American TV networks are known to be salivating at the prospect of the British aristocracy giving evidence live during the three-week trial, if it is televised.

They will expect a huge ratings boost because millions of Americans are still obsessed with details of Diana's life seven years after her death in a car crash in Paris.

In the past year, interviews with her former butler Paul Burrell, and home videos of the princess provided by voice coach Peter Settelen, have drawn huge prime time audiences.