I did findthe Albertagaming regs, andthey actually do say that hand that touches the muck is fouled and a fouled hand IS Dead. (I think this is a terrible rule but that is what happens when the government gets involved in micromanaging the game.)

Though I still contend this player was entitled to the side pot as the regs also provide:

"if at any time before the hand is called only one
player remains in the game, he wins the pot and
does not have to expose his cards;"

I contend that as it relates to the side pot there was only one player in the hand he won the side pot.