Cancelling order after unpaid item case

Help!  Sold an item, buyer did not pay and an unpaid item case opened due to my settings.  He later paid but when I went to pack the item I found it was broken so we agreed to cancel the transaction.  EBay will not allow this saying that a case has been opened!  Buyer is in US and has paid for postage via eBay global so I cannot simply refund.  What do I do.

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Ask the buyer to open an 'item not received' case, refund from there, there's no penalty as long as your buyer doesn't need to escalate and your selling fee is credited.

Contact ebay's live chat and see if they can cancel and refund manually - at the bottom of this:

https://ocsnext.ebay.co.uk/ocs/cusr?query=166&levelHierarchy=3a6a3