Sorry if this sounds harsh but ...
If the contract has been signed and used by (presumably) thousands of pax and tested on occasion (presumably) by hundreds of pax, then it is legal. Morality doesn't come into it.
If one is dealing with a contract that lands up with a person being in slavery (to take an extreme example) then morality comes into it. However, the courts tend to be old fashioned and all 20th Century about these things, rather than the realities of 21st Century LCCs, so they might be on the side of the pax. If they do, it will result in the carrier tightening their Ts&Cs against further loss.
Key points will be:
- Did the pax get IN WRITING that the airline could not offer them any alternative flight?
- Failing that, do they have a reliable witness?
- Do they know the name and duties of the carrier rep/agent who told them, or is it going to be "This person said ..."?
- Did they check with the carrier's web site or further up the tree before choosing to make alternative arrangements?
With a LCC, it is usual for it to be 'transport at a time of our choosing or zero' OR 'full refund and find your own way'. I have had to make this choice myself before and that is the choice you make every time you book an LCC anywhere in the world. 99.9% of the time, they get you there on time and that is why they are cheaper.