Moggiee, your quote isn't quite correct.
This is copied directly from CAP 393:
(b) The 500 feet rule:
Except with the permission in writing of the CAA, an aircraft shall not be flown
closer than 500 feet to any person, vessel, vehicle or structure.
The word "Obstacle" isn't included in the regulations for VFR.
The aircraft was illegally low over the farmhouse but probably NOT illegally low in the valley, unless his own house was closer than 500 feet and he wasn't intending to land as part of the manoeuvre.