Video Camera Sold On eBay Never Delivered

I put a video camera for sale on ebay, listed that it would be send by standard 2nd class mail. I sent this from my local post office and kept the receipt. After two weeks the buyer had complained a few times that it hadn't come and was checking out why, whilst I was offering all advice and information to help him. He filed a dispute through paypal, I had stated that in the agreement of purchasing the item, it would be sent by standard mail, which the post office lost (and only compensate back £46). I send paypal a copy of the receipt as proof that I had sent an item to the buyers address at the correct date etc. Paypal decided to refund him the £225 and minus it out of my account, which was on £0 and is still in the minus as i refuse to pay back. So this guy has money that never existed? And the fact it happened all so quick and they took 'his word' that he didn't receive the item, against real evidence that I'd sent the item to him.
Surely they should have denied his dispute and sent him to the post office to get compensation.

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