I lost a regular post package to HK recently. Simply gave a refund to buyer. Filed a case with post office, which recently wrote to me saying that they will consider my application after 3 months only.

More relevant to your situation, a buyer in UK recently received my item in broken state. Sent me pictures and I gave full refund. That was sent registered post so I filed a case with post office, who called me last week to say that a cheque is on its way for the full amount ($80 + postage). Still waiting for it.