I would offer to send the colour they ordered on return of the original and after checking everything is still in the same condition. You could also ask them how they confirmed their colour choice, as your records do not indicate a specific choice was made (thus you would need to check where and how the oversight occurred to prevent it from happening again).

Is it an eBay dispute, or PayPal dispute? If an eBay dispute, it's up to you and the buyer to communicate and resolve the issue. If it's a PayPal dispute, they will decide on the outcome If the dispute is escalated to a claim, and chances are (if the colour is completely different to what the buyer says they requested) they will be required to send the phone back and a refund issued once you confirm it's back in your possession - do not refund without return, though. 

If it turns out they did specify a colour choice and it was overlooked or missed somehow, I would reimburse the return postage costs, but not if the error was the buyer's - due to the way the variant listing format works, some buyers think clicking on different images in the gallery make a specific choice in other listings that show a variety of choices in the gallery but aren't actually variant listings.