I can't quite understand what they were checking though, as everyone
they stopped had already gone through the exit barrier with their
Oyster - and they were asking to scan them. They didn't seem to care
about those, like me, with paper tickets.

Excuse me, possibly stupid: How far does LU reserve the right to check
your
ticket after passing the gates or leaving a bus? Honestly, after I passed
the gates I would have thought I left their area of control.

I'd agree with that when it comes to having left a bus, but they have the
right to ask to inspect your ticket anywhere on LU premises.

What would happen if you refused to be checked? If you told them you just
entered from the surface, and were leaving on another exit?

Well if they'd just seen you pass through the exit gates or you emerged from
a direction where there were only exit gates then I should imagine they'd be
disinclined to believe you. As far as I am aware you don't actually have to
be caught in the act of breaching the bye-laws, only for it to be reasonable
to believe that you have done so.