Because Paypal would have to prove that you owe them the money.
In order to do this, they would have to prove that the refund that they decided to give was within the terms of your contract with them.
In order to do this, they would have to be able prove that the item you sent was not as described/faulty/etc. enough for a refund to be justified.
The terms in their T&Cs which say (paraphrased) "we can give a refund for whatever reason we feel like" are irrelevant, they can't override the Unfair Contract Terms Act.
Unless you're a complete idiot and send messages to the buyer saying "lol, i know the item was faulty and there's nothing you can do about it" then the worst they can do is send you a couple of threatening letters and send the supposed "debt" to a DCA who have no power to do anything other than send you more threatening letters unless they get a court order, which they wont* (see above).
They rely on people just caving in/being scared of their T&Cs.
I'd be interested to know the details of your case, since I can only imagine you either didn't turn up to any court appearance (so by default it went against you), or you gave them some actual evidence of a breach of contract.