Who owns the website? If I asked somebody to do a little work and fix up my existing website, I wouldn't expect them to hold it hostage in a billing dispute. But if they built the whole thing, I don't think I'm entitled to any of it until I pay.
Typically - and I am purposely avoiding too fine a point on this - the copyright remains with the creator until payment occurs. Otherwise no transfer of rights has occurred.
I agree. The worst he should have done: bring the website to the state where it was before he replaced it with his website. Not hold hostage the hosting/domain which I'm sure the client didn't bought from him and if they did, at least the domain name was paid for. So route that into the void if you host it.