There are a few things you can do to help your client and yourself. (But Heidi is right, you should be planning to refund the client's full payment.)
First, ask politely that the customer wait a full 20 to 30 days from shipping (but less than the PP 45 day deadline) to allow time for the parcel to arrive.
With the exception of letter/light packet service, Canada Post insures parcels against loss or damage in transit automatically. Assure your customer of this. It often helps.
Remind the customer that it is the Christmas season and Canada Post advises against shipping outside Canada after November 30 and against shipping domestically as of December 15 (I think those are the dates.).
Ask the customer to check with family members and with the local post office that the parcel is not forgotten on a shelf somewhere. (Include the BBQ on the porch, apparently a common sight in the USA, and between the screen and back doors of the house.)
Always sound concerned and helpful.
Most of the time, the customer is right and the parcel has not been delivered. It will be, eventually, but it has not yet.
If the customer starts mentioning PP disputes, refund.
Ask that the customer refund the refund WHEN the parcel arrives. Let him know that he can do this through PP's Send Money.
Don't take it personally.
Stay polite and helpful.