I agree that Cathay did the correct thing according to "the book." However, in this case they managed to make both of us upset and ensure that more of my business goes to SQ. As there were biz class seats available, they could have upgraded both of us easily, and I would hope that either the purser or the gate agent is delegated sufficient authority to make the occasional exception without rath from senior management.
In any event, when we were told that we could not sit together in biz class I said I didn't want the upgrade and we would sit together in our assigned exit row seats in coach. I was told that my seat had already been reassigned and that there were no longer 2 seats together in coach and that I MUST upgrade. Silly.