However, in a free country, if some Walter Mitty wants to throw money at flying lessons not being funded by the taxpayer, he/she surely has that right?
There was one infamous guy whose Daddy paid over a million bucks for him to do a sim course and 20 circuits in a B737. After hassling airlines all over the place he couldn't get a job anywhere. No way was he going to do time in the bush with GA as it was deemed too rough a place for our boy, so Daddy thought he would buy him a job by 'investing' in the airline. It still didn't work because prized son was never going to make it as an airline pilot. What's the saying about a fool and his money being soon parted?
The only obligation the instructors have is to tell the person that their progress is not normal and not to the standard required. If there is suspicion that the person will then go to some unscrupulous school and somehow get checked out, a confidential report should be made to CASA.