If you want a legal answer, hire a lawyer. If you want a practical answer:
Give him a copy of the file, and be more careful with your agreements in the future.
If you tell him to pound sand, he’ll likely badmouth you to other potential clients. Perhaps along the lines (if you are lucky) “I don’t want to go into details. He did nice work, but he’s not someone I’d feel comfortable doing business with in the future.’ or even ‘I did business with him once. I won’t make that mistake again. Proceed at your own risk’.
Not a good way to start out with your business.
Exactly right. Give him the file and keep working. This argument isn’t worth winning and could cost you future business. A very cheap lesson to learn. In addition, let him know that typically you should be paid for the original but you want him to feel special.(wink)