Absolutely, I'm not saying Davenport Lyons are right, they almost certainly aren't, but neither is the OP just because he thinks he can get round their claims.
I don't agree with using loopholes to protect yourself from illegal activities, and that goes for anyone - Davenport Lyons aren't making themselves seem any more honest or law-abiding than an illegal filesharer at the moment.
I agree with both of you, but even though the file-sharer is still in the wrong I'd still take his side in this case because, in my subjective and non-factual opinion, bullying someone for £800 is the worse crime here.