It is usualy interpeted as "If the customer is unable to show an in-date railcard" etc.
That was also my interpretation of the rule too.
Just to show how pedantic we could be check this from the same page of the handbook:
From the Senior Railcard section:
1) Checking the validity of the Railcard
To prevent the use of colour photocopies of Railcards, ALWAYS take the railcard out of the wallet and check that it is genuine ticket stock.
Always ensure the Railcard has been signed on the reverse side. If the card is unsigned, ask the customer for a document with their signature on (e.g. credit card), then ask the customer to sign the Railcard. Compare the signatures.
Check that the railcard is in date.
Also of interest are the following passages from the T&C of senior railcards:
5. You must carry your Railcard with you on your journey and when asked by rail staff, you must show a valid ticket and valid Railcard. If you fail to do so, you will be required to pay the full price Standard or First Class Single fare as appropriate for your journey as if no ticket was purchased before starting the journey and in some cases a Penalty Fare. This does not apply if there was no ticket office at the station at which you began your journey or if the ticket office was closed and there was no ticket machine from which you could buy a discounted ticket.
9. The Railcard does not become your property and if requested must be handed in to a representative of any Train Company.
YP railcards have an even longer list, which I'm not gonna type in, basically as above but with the addition of checking photocards, checking the photocard number matches that on the railcard etc!
The handbook (in reality a very hefty breezeblock sized folder) isn't available to the public as far as I'm aware, most of the passengers' responsibilities will be set out in the
NRCOC▸ with additional conditions on each railcard application form.