Ryan Simonds was in March awarded £4,250 damages after breaking his arm in the accident during his primary school's sports day.
'Such events could easily become uninsurable, or only insurable at prohibitive cost,' he told London's High Court.
He accepted arguments from the school's barrister, David Sanderson, that it would be 'madness' to hold the school legally responsible for what was a pure accident for which no one was to blame.
Ryan had sued the Isle of Wight Council over the accident which happened on 18 July 1997 when he was a five-year-old pupil at Chillerton County Primary School, near Newport.
He and his mother Michelle had had a picnic lunch about 50 metres away from where older classmates were playing cricket when she decided to go shopping and pointed him back to where the teachers were.
But she had only got a few yards when she heard Ryan scream.
Instead of going back to the teachers, he had strayed onto a nearby playground where he had jumped off a swing - pretending to be Superman - and badly fractured his right arm.
In March this year, Judge Norman Rudd said the school had been aware of the hazard posed by the swings - which had been placed out of bounds - and should have immobilised them or taped them off.
But, overturning the decision on appeal by the council, Mr Justice Gross said: 'Playing fields cannot be made free from all hazard. I cannot conclude that the school was in breach of duty.'
He said that, when dealing with compensation claims, the courts 'must keep in mind a sense of reali ty and common sense at some point'.
No amount of supervision by teachers would have prevented the accident and it was 'slightly unreal' to suggest that the school owed a legal duty to warn Ryan's mother of the hazards of unsupervised play on swings.
'This was a properly supervised event and any further warnings would have made no difference,' he told the court.
Mr Sanderson earlier told the judge it was 'not remotely reasonable' to expect teachers to immobilise or tape off the swings. Judge Rudd had 'imposed too high a standard of care' on the school.
The barrister added: 'This accident was, in my submission, just that: a minor injury suffered by a young boy in the course of innocent play on safe play equipment that no amount of supervision could have prevented.'
Mr Justice Gross's ruling means Ryan is not entitled to a penny in damages for his injury which required hospitalisation and several weeks in plaster.
But Mr Sanderson said that - in the interests of 'generosity and and public spiritedness' - the council would not be seeking repayment of the £250 he had already received.
Ryan's solicitors had fought his case on a 'no win, no fee' basis.
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