Hi
If your sister has not yet done so, it may help if she unpairs the watch via the Watch app on her iPhone (even though the watch is not available).
On her iPhone, in the Watch app, go to: My Watch (tab) > tap on the name of the watch (at the top) > tap on the "i" icon next to the watch: if the button is available, tap on Unpair Apple Watch.
It may also help if you, as the new owner, try these steps:
- Close the Watch app on your iPhone:
On your iPhone: double-press on the Home button > swipe left / right to the Watch app > swipe up on the app preview to close it.
- Restart both devices, turning both off together and then restarting your iPhone first:
- Try again to set up the watch:
If the watch remains locked, ask your sister, as the previous owner, to accompany you and the watch to a Genius Bar appointment, taking along her original proof of purchase for the watch or ask her to contact Apple Support and seek assistance with removing Activation Lock:
- Contact - Official Apple Support
- https://twitter.com/applesupport
- http://www.apple.com/retail/geniusbar/
More information: