If this situation has persisted for 60 years... as evidence by the old survey.. then chances are that the owner of the rear property will be successful in an adverse possession claim... However, they must be able to provide evidence.. please refer below to what they will need to provide to the Registrar.
TRANSFER OF LAND ACT 1958 - SECT 62
Power to make vesting order
S. 62(1) amended by No. 18/1989 s. 12(Sch. 1 item 95).
(1) Subject to this Act after the expiration of the period appointed the Registrar if satisfied that the applicant has acquired a title by possession to the land may make an order vesting the land in the applicant, or in such person as the applicant directs, for an estate in fee simple or other the estate or interest acquired by the applicant free from all encumbrances which have been determined or extinguished by such possession and free from any easement recorded as an encumbrance which has been proved to the satisfaction of the Registrar to have been abandoned by reason of non-user for a period of not less than thirty years  .
The website for the Victorian Land Titles Registrar... states the following with respect to Adverse Possession applications:
"Adverse possession is a legal principle that enables the occupier of a piece of land to obtain ownership if uninterrupted and exclusive possession of the land for at least 15 years can be proven."
I note that the above section 62 of the Transfer of Land Act 1958 does not specify a period of time, but appears to leave it to the Registrar to decide whether adverse possession has been proven... the 30 year requirement seems to apply when there is a easement involved.
The 15 year requirement would appear to come from an old doctrine that says, basically, that where a trespasser remains in possession of land for a period of time (usually 15 years and 1 day) then that person may have acquired ownership of the land.
With regard to the application... it is my understanding that your neighbour could provide:
Statutory declaration/s by the applicant and (if necessary to provide evidence for at least the last fifteen years) by each prior adverse possessor for their respective periods of possession to:
- explain the circumstances in which possession commenced;
- describe the use made of the land;
- describe the position, nature and (where known) the age of the fencing, walls or buildings enclosing the outer boundary or boundaries of the land claimed;
- state the value of the land claimed and the basis on which that value is calculated; and
- state that no acknowledgment of ownership in respect of the claimed land or any part thereof has been given.
The declaration/s must identify the land claimed by reference to the plan of survey or aerial photograph as an exhibit (see IDENTIFICATION OF THE LAND).
Where the applicant cannot provide statutory declarations from any of the prior adverse possessors, the Registrar may require an increased contribution to the Consolidated Fund or further evidence from additional disinterested witnesses or a combination of both.
Kind regards, James