Unfortunately u live and learn I think u will have to forget legal action on this one but I would report this to the police and your dog warden in case it ever has a child, as the woman has no recall. My neighbour has an aggressive dog who he lets out to wander instead of walking him and it really annoys me as I cannot even take mine out on a lead as he attacks him if he is out, I am trying to stay friends at the moment but I will take action if necessary as I like to think that I am responsible and as they are both terriers there will be a lot of damage if they fight, which I have tried to point out to my neighbour but he is a bit dim. Anyway hope your dog is ok, why dont you try agility classes, we take our terrier and he loves it and he also socialises in a controlled way. The borders there are fantastic.