The fact that something is tolerated does not necessarily mean it's legal.
True. But if you specifically ask the authorities about the legal status of a certain action, and they have no objection, you stand a pretty good case.
Clubs around these parts also used to offer passenger flights even if they have no AOC (obviously!) and they usually put a PPL and not a CPL holder at the controls. That only lasted until there was a serious accident with injured passengers and the PIC and the club's president ended up in court, where the presiding judge will judge the case based solely on the law and not on what's "tolerated". This immediately put an end to passenger flights being offered by flying clubs in the whole country, as they are illegal without an AOC (and have always been).
So they breached the rules on "aerial work", not those on "manipulating the controls". Completely different thing.