Preheat oven to 180 degrees C. Grease and flour two 22cm round cake tins.
Sift flour, bicarbonate of soda and salt together 3 times into a bowl then set aside.
In a small saucepan heat water, chocolate and 1/2 cup sugar, stirring constantly for 2 minutes. Remove from heat and cool to lukewarm.
Cream butter and sugar until light and fluffy. Add 3 eggs, one at a time, beating thoroughly after each egg. Add half of flour mixture and beat until smooth. Add milk and remaining flour mixture alternately in 2 parts. Beat smooth after each addition.
Add vanilla to the chocolate mixture. Blend well.
Divide batter into the two cake tins. Bake for 35 to 40 minutes or until a skewer inserted into the cake comes out clean.