It makes no difference whether the buyer has lodged a SNAD claim with eBay or Paypal as pickup items are specifically excluded by both. The buyer had the opportunity to reject the item at the time of pickup yet she chose to take it away with her, and the fact that she paid with Paypal is completely irrelevant.

If one of the semi-literate and poorly-trained cretins at eBay stuffs up and finds for the buyer, you should immediately lodge a complaint with the Financial Ombudsmans Service (or FOS) at https://forms.fos.org.au/OnlineDispute and also lodge formal complaints with the ACCC and Fair Trading.