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Garage Wall water coming through

We live in a deatched house with a garage attached to the house the neighbouring bunglow is built higher up on the garage side there is a retaining wall wich runs the full length of the drive and down the side of the garage through to the back garden there is a gap of about 4 inches between the retaining wall and the garage wall with a thick plastic like membrane between the two.
The problem is the garage wall is salting a lot and the bottom of the wall and where the floor meet inside when we have had heavy rain or the neighbour is watering his garden (soaking it in the summer) is seeping water so the floor is swimming. The problem we think is the gap between the garage wall and reataining wall has been filled in with what looks like hardcore and cemented over on the top their path to the garden runs along side the garage wall halfway up so it seems rather than leave a gap on their side they have laid patio slabs to form a pathway and decided to go flush to the wall. We have approached them about this problem and to be fair they put a drain along the path to try and resolve it but it hasn't the water is still coming in. Also the issue being (so they say it was like it when they bought the bunglow we have been in the house 3 years the surveyor did mention damp could be a problem but not water pouring in)
We do not know what to do next if our buildings insurance will cover it or if theirs would?? They are both in their late sixties and we do not really want to cause them any stress either. Any help/ideas would be appriciated Thanks In Advance
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