Ive found that some council's do govern the fences, some don't.
Basically, the fence has to be split 50/50 As its both of your fences. How-ever an agreement has to be reached upon what type of fence you are going to install. Some council's have minimum requirements, ie: must be at least 1.8m high from the ground on the highest side. Some council's tell you what sort of fence you have to have, ie: colorbond, fibro, thatching etc..
After that has been reached, they need to get 3 quotes, and you can get some quotes of your own. Once you find a quote you are happy with you go with it.
Regarding the survey, this is my area of expertise, as its what I do day in day out. A survey will not tell you shit about the fence line. What you need is called a "repeg" where your boundaries are re-defined by geodetic marks. If the neighbour wants to dispute the boundaries, and wants a repeg, HE has to pay. Nothing to do with you. If you want the number of someone who can do the work for you, give me a buzz Tino. Like I said, I deal with this every day.
As for complying with the request, if the owner gets a survey done, the surveyor's will make every attempt not to step foot onto your property. But sometimes, this is not possible, and they must seek your permission before stepping foot on your land.
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