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I might be a bit late on this one but anyway...
It all sounds like rather petty behaviour from your neighbour. Lawyers are next to useless until you have proof of the boundary position.
Tell him to get a Surveyor to replace the boundary pegs. They are the only ones who can legally define where the boundary actually is. Council have nothing to do with it. The fence is (in most cases) irrelevant when it comes down to arguments over those kinds of distances.
Does he actually want a new fence in the right location? Even if the boundary is where he says it is, I suspect it would be up to him to move the fence (or negotiate shared costs with you) if the current fence is to a decent standard.
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