Somebody please correct me if I'm wrong, but I don't see any 'legal issues' arising should the aeroplane be pranged in GTE's case, if the pilot being checked holds a licence to operate that class of aircraft.
I am not a flying instructor, however I do fly with newcomers to our operation flying 172s in and out of short strips to familiarise them with our specific way of doing things, and how to handle an aeroplane differently approaching differing lengths and surfaces of runway.
Ultimately the person I am 'checking' is PIC, as they have an SEP rating attached to their licence which allows them to act as such. I am simply a passenger, offering advice when required. And should all else fail, a briefing beforehand allows me to regain control - "I have control."
This is in no way intended to diminish the skills of flying instructors as it is a completely different kettle of fish - a flying instructor teaches towards the issue of a higher licence, a new rating, complex conversion etc. All we are doing here is flying with somebody already technically qualified to do what they're doing, but may need a steer in the right direction because it is using different skills, although their licence says they are already competent to do it.
Apologies for thread drift.