As part of the legally required procedure to gain your Hotel Licence from the BTB you have to submit your cancellation policy to them. They should have it on record and are the official route for arbitration or complaints if you feel wronged by the Hotel.

While they look to be in breach of their policy bear in mind many of the cancellation policies are the same or very similar and that once you are within 45 days or so of arrival penalties are usually incurred. This is as the likelihood of filling the space is less and less the closer you get to arrival date, and often other people have been turned away in the interim of the booking and the cancellation.

Despite the fact they are running a business, in your tragic experience I would have thought at least a credit towards a future stay could have been offered - even IF they were within their rights to keep the deposit.