An elderly artist whose huge inflatable "dream machine" broke loose from home-made moorings at a summer fair, killing two women trapped inside, was convicted of breaching health and safety rules yesterday.

A jury found Maurice Agis, 77, guilty after two days' deliberation, before retiring to consider two further charge of manslaughter of the victims through gross negligence.

They were later sent home after failing to reach a verdict and will return this morning to continue discussions. Mrs Justice Cox gave a direction allowing a majority decision if necessary.

The first verdict came at the end of a month of evidence at Newcastle crown court, which heard how Agis's Dreamspace V was caught by a gust of wind and flipped on its side at Chester-le-Street, County Durham, in July 2006.

The honeycomb of brightly coloured translucent cells - designed to induce a tranquil, relaxed mood in paying visitors who donned blue, red and tallow capes before clambering inside - reared up to the height of half a football pitch.

Elizabeth Collings, 68, and Claire Furmedge, 38, both from the Chester-le-Street area, fell from close to the top through the warren of flimsy partitions and were killed on impact with the ground. The 27 people injured included a three-year-old girl, Rosie Wright, who was hit by one of the inflatable's electric fans as it ripped away from cables and plunged down.

Her life was saved by an off-duty consultant anaesthetist who gave first aid before an air ambulance flew her to hospital in Newcastle, where she has since recovered from multiple injuries. Survivors gave harrowing accounts of suddenly finding themselves above a huge drop, then plummeting down inside the out-of-control balloon, bouncing off internal columns as they fell.

The artist, from Bethnal Green in east London, sent a grief-stricken apology to relatives of the victims after the disaster and promised that Dreamspace would be scrapped. He had previously described the artwork as the culmination of his career, which saw progressively larger inflatables developed over 30 years.

Only one had previously torn loose from its moorings, in Germany in 1986, but Dreamspace V was evacuated several times at Liverpool, its previous venue on the 2006 tour of Britain, because of sudden winds. Staff at Chester-le-Street reported problems earlier on the day the tragedy happened in Riverside Park.

The inflatable was temporarily closed after a cleaner reported part of the floor rising five feet off the ground, and again when technical staff witnessed the same thing several hours later.

The artist listened intently during the trial, frequently making notes. He was allowed to sit in the well of the court with the lawyers, rather than in the dock.

He said in his letter to the victims' relatives that he had been "consumed by the tragedy".

The jury of five women and seven men found Agis guilty of one charge of breaching the Health and Safety at Work Act 1974. At an earlier hearing, Chester-le-Street council and Brouhaha International, whose managing director is Agis's son Giles, admitted similar charges.

Peter McDermott, of County Durham and Darlington fire and rescue service, told the jury at an earlier hearing that the aftermath of the incident was "like a war scene".

Keith Vickers, a St John Ambulance superintendent, told the jury he saw the artist and a member of staff try to grab the huge sculpture as it lifted off. "They tried to hold it down, but it didn't work," he said. Agis was lifted off the ground before he let go, the court had heard.