Could have been stolen by a postie, could have been opened by Customs and improperly resealed, could have been stolen once delivered (stolen off the porch, so to speak) - all sorts of possibilities.
File the insurance claim with Canada Post if you shipped Small packets or if you had insurance and refund the guy - you have zero chance of winning a Paypal claim on this, so might as well lose graciously.
Imagination will often carry us to worlds that never were. But without it we go nowhere. Carl Sagan