Firstly, I'm happy to see that this thread has developed into a very good read on what members consider a breach of contract and a copyright infringement, both in the UK and elsewhere.
However, there seems to be some argument as to which my case was. In summary, this is what I was told by my legal position was:
I did have a contract with the company and I completed my side of that contract. The company, after 6 weeks, decided that they were not happy with my work and, despite my offers to re-edit or re-shoot, sent the discs back and refused to pay. In effect, they had cancelled the contract.
It is evident that they had made copies of the images, images that they were only entitled to use upon payment, which was never made. To that end, they had no entitlement, or licence, to use the images. It's worthy of note at this point to say that I held all the model release forms for everyone who was in the images.
Seeing the images on their websites and Facebook, it was also evident that ther were using the images. This flys in the face of their argument that they were not happy with the images, and no additional editing had been done my me or anyone else. So, they were in fact, using what they considered to be unsatisfactory images to promote their business.
The company WERE in breach of my copyright, as they had no licence to use, copy or distribute the images. This was caused by their refusal to pay the contract.
Had they paid the contract, even at a reduced rate, they would have had the licence, but they had nothing.
Had they not have used the images, it would have been up to me to prove, in court, that the quality and composition of the images were justifiable for the fee charged. Photography can be very subjective and one persons opinion will rarely be the same as anothers. Had I been successful in proving my case in these circumstances, I would likely have won the original fee plus interest.
As things were, they decided to use the images, which I, and most others, agree completely destroys their argument that the images were unsatisfactory. In doing so, they were ALSO in breach of my copyright. It is irrelevant that there was a contract in pace for the use, as the contract was never paid. It is on the same level as them lifting the images from Flickr or Facebook.
The advice I was given was that the company were guilty of BOTH breach of contract (for non payment without good reason, proved by their use of the images) and also breach of copyright (they had no licence in place to use them).
If I were to take the case to court, which I was prepared to do if there was no settlement, I would have had a very good case. But, nothing is ever definitive, and a good lawyer could have put forward a convincinging enough argument to prove me wrong, or at the very least, provide an element of doubt.
I took the money and ran, as I didn't want the situation to go any further (it had been ongoing for 18 months already) and it was already starting to impact on my relationship. So the original amount and a peaceful life is better to me than triple the amount and the loss of the woman I love. You sometimes have to be there to understand!
I'm not a full time photographer, I have a career which restricts me from certain activities and I have to respect that. However, I do feel that I should be paid for what I have done and to that extent, I have been. Yes, I could have taken more money, taught them a lesson and took them to the cleaners. It's even possible that I could have forced them into a really tight corner with a favourable judge, but I wasn't after blood, just my money.
Finally, as there is clearly a difference between the UK and US systems, the link below was key to proving my case to the company, and possibly, what prompted them into action:
The case revolves around a photographer who sold images of drugs to the National Health Service. They passed them Oporto. A charity, who used them in breach of copyright. The judgement explains how this happened.
The judge ruled in favour of the photographer but disagreed with his valuations. Under point 47, the judge makes his ruling for total damages, which is £10,000. The Department of Health originally offered £50,000 to settle out of court but the photographer refused it. In the end, he got only 20% of what he was originally offered, and I certainly did t want to end up in the same situation!
So, that is what happened. The company breached the contract AND breached my copyright, as one does not automatically dismiss the other.
Again, I'm glad that this has provoked such a genuinely interesting response and I look forward to reading the replies.