No one can sign a party wall agreement and then ask for the wall to be built off the party wall. That's a nonsense as that means the PW Act does not apply and the notice can't be served in the first place.
But we don't know the terms of the agreement. So far as we know, the neighbour declared that padstones would be going into the wall, but this does not imply that the dormer wall would be built off the party wall.

