I will add to that the eBay policy also notes that Paypal have a similar policy.

http://pages.ebay.com.au/help/policies/identity-false.html

"PayPal users - you should also be aware that PayPal may apply similar sanctions for false or missing contact information".

I would make a phone call to Paypal to report the member for misrepresenting their address in this transanction on Paypal. . May make no difference, but also may place a flag on the users account. who knows.....