While I don’t refund the deposit on any project, there are mitigating circumstances where I would refund the balance that was paid. This usually would be something that is entirely out of either of our control, for instance if the person is seeing financial difficulties and is in sudden dire straights I’d be inclined to refund the project or if the person has a legitimate emergency expenditure, I’m likely inclined to do a refund.
These types of situations happen and they are determined on a case by case basis, if I do refund a project the person will then have to turn over any of the project files and sign a legally binding agreement that they will not use the copyrighted material until full payment has been made. This will be paired with their original contract and held on file until the project has been either terminated or paid for in full at a later date.
Has it ever happened? Not to date yet, luckily.