Very Similar circumstances in this midair I am very familiar with. In "HARD VFR" weather, see-and-avoid by the eyes in the cockpits is the predominant rule governing separation. The person controlling the activity/airspace is only functioning in an "advisory role."
Tre but if the guy on the ground sees something then he should advise the pilot. For example, if providing information on an air to ground frequency in the UK, I have given a runway occupied to an aircraft on approach, and he still continues I will give "confirm going around".
This did happen fast though.