It all becomes clearer now...
There are a number of factors at play here. Firstly you can see how bent the strut rod is, and the diff yoke is coming too far out of the diff and allowing the wheel to come out at the top. Look at how far the yoke came out once the strut rod was released. The drive shaft and strut rod are effectively the upper and lower wishbones, you can imagine how iit must have been to drive.
There is also a lot of wear in the trailing arm bushes, it all adds up to a very floppy rear end. Once the driveshaft was removed the yoke slid right out but showed no wear. I guess it has already been apart and not put back together very well.
