Cancellation with Iberia and problems with EC statutory compensation

Siris

We recently returned from Quito to London via Madrid. About 4 hours before we were due to fly Iberia notified our flight to Madrid cancelled. They booked us on the 14.30 flight following day and put us in a hotel. We applied for our EU statutory compensation; first me and 3 days later my husband. My application was initially granted in writing and then it seems overturned. No reason for delay was given until 4 days after the flight and when our application refused. I'm of the opinion Airline being less than truthful as these delays and disruptions frequent in the region..I know for a fact my friend had cancellation the day after ours notified at same time as us and rebooked 24 hours later..how could they know of Air Traffic Congestion 24 hours before plane due to fly. 
Any ideas what next? Tried Resolver and more forceful email. Nothing! Thanks

Emmia

What was the reason given for the cancellation?