I haven't checked the Standards lately, and I could be wrong, but my understanding is that, unless you're a PADI Divemaster (with insurance), you weren't DM'ing the class, at least as far as PADI is concerned. So, if he was relying on you to increse the allowable student-instructor ratio, he seems dumb enough to talk through a snorkel.
But I could be wrong.
Not meaning to bash you or the instructor, but the lawyer in me thinks its prudent to have a PADI DM know about defog and snorkel-reg exchanges. In fact, to be a PADI DM, you must not only know they exist, but be able to DEMONSTRATE them to students an Instructor level.