I'm not sure I quite know what you are getting at, maybe it's different where you live... neighbours have every right to lodge a complaint if your dog is nuisance barking regardless of if it's in its yard or not. Being fenced in doesn't make a difference to noise levels. If your dog is barking in your yard beyond what the council consider to be a reasonable amount they are within their right to issue you with a warning notice.
Hopefully you can talk to your neighbours and find a solution that suits you all. Unfortunately, seeing as their rabbit is confined to a cage, I don't know how much you can do as by law, it is your responsibility to stop your dogs from barking. From the sounds of it, the neighbours are technically doing the right thing by keeping the rabbit contained and on their property. A very frustrating situation I am sure.
