That's a good question - back then I didn't have enough knowledge to worry about that sort of thing. I logged what I was told I was allowed to log. Duty time was limited by the wallet as far as I could tell.
It just seemed to me that the PIC was less a legal requirement and more a recognition of who was actually flying the plane.
Having since looked up the FAR/AIM, it quite clearly states that "a recreational,private or commercial pilot may log PIC only for that flight time during which that person is the sole manipulator of the controls of an aircraft for which the pilot is rated" (FAR 61.51(e)).
On the other hand an authorised instructor may only log PIC when acting as an authorised instructor. I suspect therefore that the guy flying in the left hand seat for those couple of times the insurance required it, he should not have logged the flight time at all, as there was no legal requirement for him to be on the flight or manipulate the controls.
Although I can't see any Oz instructors going for that, I still think it sucks if I want to do a flyaway with the Mrs and need to demonstrate 3 landings for the company, I can't log PIC even though the instructor is really only providing ballast.
My head hurts.