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What province are you in please?What is the neighbour saying when you discuss this garage if you have tried to do so?
He is wrong on both counts.
He is liable for any damages that you incur as a result of his actions or his property. So you can sue him for any damages you suffer.
Secondly, he most assuredly cannot encroach on your property without you consent. It makes no difference at all that the former owner agreed. Unless he has an easement registered on title he does not have the right and a court would order that it be removed.
Does that help?