Not sure what it said in the demolition permit - we told the demolition guy, and he did the permits etc. He also chatted to the neighbour before the demolition, as well as my husband.
qebtel - We might go down that path with council, it makes sense that they would have to get involved, even though they have said "civil matter, nothing to do with us". Or as suggested above, maybe with support from a counsellor.
Husband wants to see what the neighbour has in mind first - we still have not recieved the report that he said he would email.
Still hoping that it will be resolved soon.