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Paypal dispute

Ok, I opened a dispute the other day (not escalated to a claim) because of a disagreement with a (business) seller. Basically they wanted more for postage and I told them to either send the item, refund in full or refund the postage I'd already paid so I could arrange my own courier.
I opened a dispute because they'd been stalling for a few days, and wanted to get things moving.
Anyway, they just sent me this email:

"We have went to refund the postage costs for you and we have noticed that we currently cannot access the funds passed from you to us as this is under review, we cannot refund you until this is resolved as soon as any block that has been put in place is removed by paypal we willl issue the £9.95 charge and allow your own courrier to collect the item."


Now I've never been on the receiving end of a dispute, but surely that doesn't sound right?!
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