In the situation described, panel members would not be automatically disqualified, since the disqualification rules relate to the school being appealed for ("the school in question
..... any person who has, or at any time has had, any connection with the authority, school or [any person employed by the local authority or governing body of the school in question, other than as a teacher or teaching assistant] which might reasonably be taken to raise doubts about that person’s ability to act impartially. http://www.elevenplusexams.co.uk/appeals/general#a30
However, it is a requirement that panel members should be independent
. There is nothing in the rules, for example, that specifically states your best friend or worst enemy is disqualified from hearing your appeal, but clearly that would not be acceptable, and your best friend or worst enemy would be expected to declare a conflict of interest and to withdraw.
In the case described, I think it would have been best practice for the person or persons concerned to have mentioned a possible or perceived conflict of interest, and for the appellants to have been asked whether or not they wished to proceed.
The appellants themselves could not have raised any objections at the time, because they were unaware of the full background of the panel members.
I do think it would be worth making a complaint, first to the admission authority, and then - if necessary - to the ombudsman or EFA as appropriate, but it is not entirely certain what the outcome would be.http://www.elevenplusexams.co.uk/appeals/ombudsman