You are quite right cats; from what has been posted to date, I am indeed working on the assumption that the seller didn't complete any separate lodgement paperwork, and when (or if) Sue rings Paypal again, she certainly needs to find out if the accepted proof of delivery was provided before officially complaining to the FOS.

However, as I said, from what's been posted so far, I'm betting that it was sent as a normal express satchel with no additional optional paperwork to verify the recipient's name and address, and that on this occasion, Paypal have improperly rejected Sue's claim.

Either way, I'd be lodging a dispute with the FOS regardless, and leaving it up to them to find out whether Paypal have erred or not.