Compensation is payable to the passenger affected, not to whoever paid the fare. The entire Regulation uses the word passenger throughout, as one would expect, since it is to protect passenger rights when travelling. So if you booked a trip for a friend and paid for it, your friend would get any EC/261 without reference to you. If the Regulations were intended to protect the purchaser it would have said as much. So I would respond back to the airline concerned, pointing out the Regulation's wording and intent. I guess it's just another attempt at "kick into long grass".