While I'm not a lawyer or familiar with Australian law, I do know some fundamental principles of law here in the US. You can sue anyone for anything, period. And I'm sure you'll have no shortage of lawyers willing to sue anyone for anything on your behalf. But one of the first things the lawyer is going to ask you is "What harm has befallen you because of this individual's actions?"
Has he obtained money that, in his absence, would have otherwise gone to you?
Is he claiming that your specific creation is his own, or using it as a component in a larger creation? If his "payware product" is your creation on an empty baseboard, you may have a case. The more "other" items he adds to the product, the less of a contribution your item becomes, and as such, the likelihood of your case succeeding diminishes.
Has his inclusion of your creation in his product diminished or tarnished your reputation?
Have you been accused of a crime as a result of his actions?
Without harm being demonstrated, the chance of any civil lawsuit succeeding is very slim at best. The notion that you can give something away, and simultaneously retain control over it is going to be a tough sell, regardless of any license agreement written.
As far as this being a criminal act, if you live in an area that has the time and the resources to prosecute someone for violating the license agreement of something someone gave away for free, run for your life. In most places, I believe littering is considered a more severe crime.
Another thought as far as intellectual property goes, isn't the image of something as much a part of the intellectual property as the product itself? And as such, did we all obtain permission from the various locomotive manufacturers, car manufacturers, railroads, et al, for the use and possible profit from, the images and visages, paint schemes and heralds of said entities in our own little universe?
So in that sense, isn't this entire operation kind of a "criminal" enterprise?
(granted you scratchbuilders are exempt from this)
If the law was as straightforward as most people think it is, we wouldn't need lawyers.