No, sir; you did not do anything wrong.
I've been in some bad situations, before; it’s almost never immediately clear or obvious that things are as bad as they are in situations like this, and I'm pretty impressed at the realism of the story.
I would have a LOT of trouble not setting the "knights" on fire, and I would never, EVER, trust any representative of that government again.
It would be hard not to try and hunt down the fuckers responsible and at least burn their mansions down; maybe cast the weakest possible healing spell on them, so they stay burned, wishing they could die, but unable to do so.
Yanno, like a subtle reminder.