Thankyou for that, Airpolice.
It would appear to me that blame would therefore lie solely at the feet of the FE; the FTO can only assume that by agreeing to conduct the test the FE is qualified. Then it is reasonable for the hapless candidate to assume the same 'because the FTO wouldn't do anything illegal...'.
So, the candidate could call on the FE to return the cost of the FE fees but may have to resort to legal channels to recover the costs of transpoprt to/from, aircraft hire and any application fees taken to date. More costs that the FE could argue are 'not my problem'.
What if the candidate chose (unwisely, granted, but within the rules) to take the test on the last day of theory exam. validity? Retake the lot before retaking the skills test. More cost. Can he/she then return to the FE for those costs?
As mentioned earlier in the thread, licences can be revoked years later when these issues come to light - even when the most affected party has pursued the privileges in good faith.
What a nightmare. So avoidable with the supposed strong grip of the regulatory regime and the internet; time to change the system. It may cost more, but I believe we need more support from the CAA.