First, the knife must be handled and evaluated by Uncle Bill, and then any other measure can be taken. If the owner destroyed the knife attempting to sharpen it due to its lack of skill, it is not HI problem anymore. If he just couldn´t sharpen it due to his lack of skill, he is lucky to have a few forumites offering help, and he may learn something on the process. If the knife proves defective - what seems not the case - it should be replaced.
No refunds necessary, and any refund matter should have been discussed between the parts (selles/buyer) at the moment of the deal.
That´s the way I see it and how I would act.