when in fact it was due to very few pax booked
Sigh,
The European Parliament, and the Commission, were absolutely convinced that this was regular practice by airlines. That is one reason why the penalties in the regulation text were much higher for cancellations than for delays. There was no compensation for delays, only for cancellations. ((For the minute let's ignore the fact that the ECJ has made the penalties for delays the same as cancellations.))
The Parliament, and the Commission wanted to punish the airlines for their nefarious practices and fully expected to see a significant reduction in flight cancellations at European airports with the implementation of 261. Thinking that after paying out wads of cash the airlines would stop being nefarious and fewer cancellations would happen.
Funny thing was that there was no significant change before/after the Regulation. In a study done by outside consultants done 5 years after the implementation they found the the regulation had no effect on the rate or frequency of cancellations. I've tried to find the study online but it isn't on the Commissions web-site.
I have no doubt that your cancellation occurred, and I'm not surprised that the flight that was cancelled was one with few passengers on it. No doubt one of their aeroplanes went technical and they decided to cancel the flight which would have the least financial impact on them. It also meant they were cancelling the flight that would have the least number of passengers impacted - and that would be a very good thing, at least for those that did travel on the night.
I'm not a fan of BA or the awful airports they base their aircraft at. I avoid them both because, when things go pear shaped they will screw the short-haul passengers first. They need to have a real hard think about other schemes that can be put in place, or find ways of proactively cancelling much further in advance. Almost everyone I know has had BA leave them queuing at the airport after learning only there that their flights had been affected by something happening at Heathrow.