I was wondering if anyone has experience with dealing with a non paying customer.
Yes- there's a new thread on this every few months or so. Just do a search and see the various ways other people have handled this.
The main thing is this: exactly what does your written contract say regarding the work, payment schedule, and repercussions for non-payment? Stick to the contract, and you'll be safe (or at least a lot safer than not sticking to the contract).
And as you can gather from the other threads, one of the most frequent comments is "I don't have a contract." If this also applies to you, start planning to chalk it up as an expensive learning experience. But to prevent it from being even more expensive than it needs to be, read on.
I have taken their site back to how it was in August which covers all of the work they have paid for.
That's probably safe footing- they're not entitled to what they haven't paid for. (That's assuming you haven't removed any content that they added since then.)
I have control over their webserver
Control and contractual responsibility are two different things. If part of your payment includes hosting and they haven't paid for it, then pulling the plug is an option for leverage. However, it sounds like they are paying a hosting company directly. If that's the case, taking their site down is probably asking (if not begging) for a lawsuit, including damages in the amount of (their) lost revenue.
am I entitled to take their domain and auction it
Are you the actual owner of the domain? If not, then you would most likely be risking criminal fraud and theft charges.
[edited by: LifeinAsia at 5:47 pm (utc) on Nov. 14, 2008]