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Maybe try to give us more info such as few photos and from your understanding if some of the biggie requirements are met or not. Some Hills props are posh including their garage and slabs. Slabs may already be class 1a and all is required is a engineering cert cost under 1k, then there are...

3m set back only applies to new build, but for conversion of existing class 10a(garage) to GF/studio(class 1a) can be less than 3m, however fire rating is required, and generally cost to the conversion.

I can't see a favourable outcome other than comply or quit. As Datto said you probably made loud construction noise that upset your neighbours. As above the biggest concern are the concrete slab, height wet area proofing and insulation requirements. It can be done, but a very costly exercise...