I would wait to see what woody or wessex say before doing anything more to the wall.
Also there is the sewer to consider.
Legally speaking your neighbour is only able to claim damages from you and there hasn't been any real damage as yet. I think the worry is you could possibly end up having to pay his surveyor bill, which could be way more than any damage caused so far.
I hope you can sort it just don't let it esculate as you both lose and only the lawyers/surveyors win.
Perhaps you can use the sewer issue to tell your neighbour work has stopped for a while and you try to defuse it with him. People often say they have gone to their solicitor when they haven't, there still might be time to defuse it as best you can.
That photo of the path edge would seem to confirm that the boundary is in the centre of the properties and that the wall is a party fence wall. Without any further details within the deeds to the contrary, that would be the conclusion if it got looked at formally.
So the OP could proceed on that basis either using the PWA to demolish and raise a new wall, or building just on his side of the boundary (and face of that wall).
Remember that if the neighbour chooses to take legal action, it is his burden to prove he is correct. He will incur all the costs in trying to do so personally, whilst your home insurers would cover yours in refuting the claim. The courts do not look favourably on trifling claims.
I think the correct thing would have been a two month PWA notice under section 2.
I also think that under this notice the neighbour has the right to dissent and appoint a surveyor to look after his interests.
The actual situation is the OP says he served a PWA notice. Was it under the right section??? Was it the correct length of notice???
To me it reads that if you cut into a party wall like the OP has without serving the correct notice then the adjoining owner could serve an injunction or take other legal action if they were motivated to.
It does say:
However, the key point is whether your planned work might have any possible
consequences for the structural strength and support functions of the party wall as a
whole, or cause damage to the Adjoining Owner's side of the wall. If you are in doubt
about whether your planned work requires a notice you might wish to seek advice from a
qualified building professional.
I could well be wrong this is just my own opinion.
I thought it was building a new wall inside the boundary not touching the party fence/wall. Which would have been fine.
Now the OP has started work on the party fence/wall by removing half the foundation with a breaker seriously undermining the wall. This is going to get expensive. If the neighbour is as awkward as they claim this would be a good time to serve an injunction.
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