A neighbour hoisted an Israeli flag in his garden during a campaign of racial abuse against a Palestinian living next door, a court heard.
Andrew Milner, 46, of Gordon Road, Shoreham, is accused of harassing his neighbour Loai El-Oun and his wife, Debbie, after a long-running row sparked by a dispute over the border of their properties.
Chichester Crown Court heard how Milner placed a golliwog in his window and set up a camera on a tripod, which he pointed at the couple's garden.
Mr El-Oun, who was born in Kuwait from a Palestinian family but now has a British passport, had initially been friends with Milner but the relationship soured when the couple demanded Milner remove a drainpipe, which had protruded into their side of the boundary.
The dispute came to a head when Mr El-Oun went to visit his mother in the Gaza Strip between May 8 and June 21, 2002.
Milner denies committing racially aggravated harassment.
Richard Barton, prosecuting, said Milner was fully aware of Mr El-Oun's origins and had deliberately hoisted an Israeli flag in his garden to upset his neighbour's wife.
Mr Barton said: "On May 16, Mrs El-Oun noticed, when looking from her garden into the defendant's window closest to her property, that a golliwog had been placed in the window.
"We all know what one is. Those old enough can recall they were regularly used as children's toys and also a time when they could be potentially offensive to racial minorities.
"She was upset by its presence in the window."
The police were called but it was only after a senior officer attended that the doll was removed, the court heard.
Mrs El-Oun later complained to police that a camera on a tripod had been set up in Milner's home and was pointing at her garden, making her feel uncomfortable.
Mr Barton said: "In the summer of 2002, the World Cup was on and this defendant's son had a St George's flag, which Milner said he bought as part of the World Cup celebrations.
"On June 19, hanging next to that flag was another flag, which appeared to be in full view. That was Israeli.
"It does not take very much common sense to see that was very upsetting, bearing in mind the husband was in Gaza where there are all the troubles.
"She was upset and called the police."
Mr Barton said Milner told police the camera's position was an accident and said he thought Mr El-Oun was Russian not Palestinian.
Mr Barton said: "This is a neighbours' dispute that went wrong because this defendant went over the top.
"The Israeli flag is not racially aggravating all the time but this has to be put into its context.
"Milner knew full well his neighbour was Palestinian and knew full well placing the flag there was intended to be a racially aggravated, hostile act."
Mrs El-Oun told the court: "I got up in the morning, not long after the camera and the golliwog. I saw the flag and it really hurt because it's just getting worse and worse."
Selwyn Shapiro, defending, said the allegations against Milner were untrue and said Mrs El-Oun was using them to help her win the dispute with her neighbour.
Mr El-Oun did not realise golliwogs could be considered racist until his wife explained it to him, said Mr Shapiro.
The case continues.
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