we didnt have a return to sender address on it so the post office must have it if the old lady sent it back to the post office.
So hang on.
You KNOW you sent it to the wrong address?
You haven't denied this so far, so I'm guessing you're admitting to putting the wrong address on the envelope?
So, it's entirely your fault that the money didn't go to the right place and yet you're refusing to pay up or return the goods?
You're lucky that this hasn't been reported as theft yet, if it'd been me I'd have already done it.
If you did send it recorded, just give out the tracking number and/or request a copy of the signature from Royal Mail.
If RM do have it, and you have the tab with the tracking details on I'm sure they'll happily return it to you.