Well i also work for a business, althou not car related, and i think in this cirumstance, with a bit of bending of the arm, steve should be given a full refund for the reasons he listed.
Why go through all of the legal implications and such when they can at least give steve his full refund + reimbursment to him with an apology for the mistakes they made, then at least Steve will leave with a more positive note that they knew they made a mistake and were realistic in that a refund was needed.
OR
They can reluct, go through all the legal cost and pain, then pay steve even more for the shit he had to go through, and then Hills would have to deal with these side effects on people like me and other forum members that would never want to do business with them.