The court was asked to rule that the debilitating psychiatric illness suffered by businessman Peter Vernon was not directly caused by his witnessing the immediate aftermath of the tragedy, but by the grief which any parent would feel at the loss of two much-loved children.
In law, no damages were recoverable for grief.
Mr Vernon's children died when his family car, driven by nanny Katherine Bosley, plunged into a fast-flowing river.
Miss Bosley was able to escape through the driver's door window.
But Mr Vernon and his wife, Prue, watched helplessly from the river bank as rescuers struggled vainly to save Philippa, seven, her three-year-old sister, Theresa, their friend, Sophie Beloe and the family labrador, Sheba.
A year ago, in the High Court, Mr Justice Sedley said the tragedy, in August 1992, destroyed Mr Vernon's marriage, changed his personality and left him a helpless shadow of his former self.
The compensation he awarded Mr Vernon, now 53, of The Old Rectory, Kingscote, Tetbury, Gloucestershire, was the highest ever for post-traumatic stress disorder (PTSD).
The award, plus costs, was in effect against the insurers of Miss Bosley, who was at the wheel of the family Volvo when it hit the kerb, went out of control and plunged into the river Tawe at Ynys Isaf, Powys.
Yesterday, Dermod O'Brien QC, for the insurers, said that it was conceded that Mr Vernon had been close enough in place and time to a traumatic event which was capable of causing psychiatric damage through shock.
But the defence argued that Mr Vernon would have suffered his illness in any event. This would be in part because of his grief, but also due to other events in his life such as the collapse of his printed circuit manufacturing company in Abercraf, Powys, his failure to find alternative employment, and a head injury he suffered in a car accident.
The appeal hearing, before Lords Justices Stuart-Smith, Evans and Thorpe, is set to last 10 days.Reuse content