If you have purchased the shipping label on pay pal, i.e. if you are using "printing your label" on paypal, you are not at total loss.
Why? Simple, Canada Post offer two very important things through the printing label that are not available at postal office.
1. Postmen never check the weigh of item using "label print on paypal". What does it means? It means that postmen will deem the shipping charge you paid through pay pal as correct. Go figure what ramification does it have.
2. You will be given a number called shipping confirmation number, i.e. you will have an official record on pay pal and canada post that you indeed have shipped the item.
But if you ship item at a postal store using small parcel, don't kill yourself yet. You can scan the receipt Canada Post gave you (assuming it's still in your hands and did not yet end up in the garbage bin), and email it to pay pal, ebay and the credit card companyu to prove that item has been sent.
I don't know what your item number was, and I did not know how the listing looked like. Hopefully you had put down the standard disclaimer:
"seller is not responsible for lost or damaged mail"
If you did not put this disclaimer in, and the buyer allege item not receive, there's none you can do, as small parcel don't have tracking number. In that case, we can only hope that the item you sent wasn't too expensive. Anyway, Torontosales, I am in Toronto myself, just give me an email (by using contacting a member on ebay) if you want to provide me with more info. I will try to see whether I can do anyting to help.