The only times PVP is thematically justified in TOR are when one is under the effects of shadow... in which case, the other one should be the "PC".
However, if you wanted to make it more fair, here are a couple options
- have each pick a range, make an awareness task, and the winner sets the range & counts as the PC.
- Have each pick a range, and the closer of the two is the range used; the closer one also is the "PC" for the round.
- abandon ranges; all TN's to hit become an opposed roll, with the target using agility.
In any case, whomever started the interparty strife should gain a shadow point if they weren't already under the effects of shadow.
For non-PC's, the PC's ALWAYS make all the combat choices. Even if you write up a particular NPC per the PC rules (which is a violation of the letter of the rules itself, but not a major one; see pg. 24 of the LM Book), the PC's pick their stances, the NPCs don't get them, can't use abilities related to them, and die on the first wound, as normal.
The Endurance rating of a Loremaster character is
really needed only when an encounter degenerates
into an armed confrontation. Loremaster characters
involved in combat are treated as adversaries, and are
knocked out at the end of a round if they are reduced to
zero Endurance, or are killed outright when wounded
once. The usual rules for Encumbrance do not apply to
Loremaster characters, and they are equipped as the
Loremaster sees fit considering their occupation and
the circumstances of the encounter.
TOR Loremaster's Book p. 27