What else can one do if you encounter an out of position aircraft with arsy instructor?
Are you 100% sure he was out of position? Did you check the radar tracks, or possibly compare SkyDemon tracks?
What I have found is that it is *incredibly hard* to judge the position of other aircraft in the circuit accurately against their ground track. The only really reliable way would be to look at their shadows - something that doesn't work all that often.
I was once approaching a controlled airfield and I just happened to have an instructor on board. We were fairly close to an aircraft ahead. We were to stay at 1500', the preceding was instructed to descend to 1000'. We watched the aircraft descend and descend further and we would swear that it was breaking the low-flying rules in a big way. It was only when we were instructed to descend to 1000' as well, that we saw them back on the horizon. ILAFFT.
In your case, that aircraft may well have been in a proper position. Maybe not ace-perfect, but close enough for a student. Maybe a little higher or lower than normal, but that happens. And the solution is simple: When you are behind another aircraft in the circuit, you follow that aircraft. Do not simply fly the normal circuit track as if there's nobody ahead of you. In your case you turned base before he did, effectively cutting him off.