There are two aspects to this.
Who made the decision to deny boarding? Was it the flight crew or MedLink? If the flight crew, the Captain's hands were likely tied if an FA turned around and said they were denying boarding. Despite the rank on the shoulder, a Captain cannot override the decision of anyone under their command when it comes to denied boarding for any reason at any of the companies owned by the crystal palace in Calgary. If it was MedLink, that's on the doctor and the Captain again cannot override that decision. So the denial of boarding, while perhaps extreme given this is a small child in a new environment, is not the issue. Gabor Lukacs knows not of what he speaks, despite his on-high attitude.
The issue is how the passengers were handled after the fact. Yes, the rules may say that only the passenger who was denied boarding gets a refund and everyone else who got off did so of their own volition and in this case because the passenger was a minor, so too did one of the parents. Common sense, however, would say you're dealing with a family at Christmas and a mishandled event will gain national attention quickly. So, make sure they're OK and move them onto the next flight. Hell, get them there sooner even if it means going through YEG. Whatever you do, don't take them through the wringer. That's where this all fell apart, but what does one expect when you pay peanuts?
But, this is all for not. No one will remember or care about this the next time they want to fly. They'll look at the price, see that instead of paying $1,400 return with WestJet from YHM to YXX, they can pay $200 return with Swoop. All their cares about how that poor family was mistreated at Christmas time will be gone before they click "next." And when they do, they reinforce to Swoop and every other ULCC that you can treat people like crap, and they'll come back for seconds.