(assuming they couldn't call it an administrative error and give him the stupid license right away)
At what point does the lapsed rating cease to be valid in your eyes? If it has lapsed by a day? a week? a year? ten years? Ever? If the examiner's rating was not valid then it was not valid.
If I were responsible for the CAA group that let this happen through lack of oversight and proper designee selection, there would be hell to pay: if I found somebody who thought the limit of their responsibilty was collecting money and pushing paper, they'd be out the door.
And what exactly can the CAA do to regulate lapsed ratings? If someone decides on a career change and chooses not to revalidate their examiner rating should the CAA ring them every month to make sure they haven't secretly carried on? How exactly could they have done more here?
There are too many unknowns here to definitively blame anyone. I'm sure the OP has contacted his/her club by now anyway and will be along in due course to fill in the many gaps.