I will fourth & Fifth what everyone else has said about contacting a lawyer in your area for advice.
In terms of my opinion your dog did nothing wrong. A dog ended up in HIS YARD and was bitten.....it wasn't as tho your dog was running loose and ran up to another dog and bit it. I certainly wouldn't be putting the dog down over an incident such as this.
I work A/C and will guarantee you we have had numerous incidents like this in Edmonton and it always turns out to be a provoked bite.....provoked in terms of the fact that the little dog had no right being in the yard belonging to the other dog.
Its terrible that this occurred.....I know my boys got a cat once and I was mortified....I live in the country and lord knows who the cat belonged to (if it had an owner).....the cat in question went into a chainlink dog run with both boys and it was turned into a tug
I was horrified and quickly went out and ended their game and disposed of the cat ~~ as much as we hope never to encounter such a situation it is truly terrible if/when it does occur. I guess you will at least have 'part' of the answer if you can find out if it was the child that threw the small dog over the fence.....I'll never have an answer about why a cat would go over a chainlink fence into a dog run
Very sorry that you are going thru this!
Heather Peters