Just a rhetorical question really, but any insights welcome - what would the TOC Customer Services do if fare paying & byelaw complying passengers complained about guards letting the people you describe 'get away' with this behaviour on the grounds that this was making their journey uncomfortable, i.e. they (the TOC) are neither providing the legitimate passenger with 'customer service' nor 'putting (legitimate) customers first' ? I wonder if there is a chance that if enough people threaten to (or actually do) stop using the trains because of such encounters the TOC would change their policy.
Strange you mention this, as this issue has reared it's head recently at my TOC. As I understand it, First Class passengers were complaining that a) The guard wasn't checking tickets in FC as often as they should and some folk were quite obviously Standard passengers without FC tickets, b) FC was being de-classified whether needed or not, c) When or if the guard did come down they were simply asking people to move, irrespective of how long they had been sat there. At the same time Standard passengers were complaining about lack of space, no seats, First Class being too rigorously enforced etc etc etc.
The response was to come up with a scheme where the Guard would personally invite SC passengers to sit in FC seats, but not announce it as declassified and not make a fuss about it. Thus keeping SC passengers happy, and similarly not having to pay out refunds to FC passengers (as FC was never technically declassified, the SC passengers were there at the Guards discretion).
Surprisingly it didn't work too well as in most cases the SC passengers just invite themselves in anyway before the Guard gets there.
Seperately, I must say that I am starting to adopt the attitude of Flamingo and co. I used to be particularly keen, but was basically told by management "look we know you are right and correct, and the ticket wasn't valid, but people have been complaining and the complaints figures for the company [mostly about overcrowding I suspect but that is expensive to fix] are too high, so if you think someone is going to complain, just let it be".