xiAo-Shin Star your scenario is good, that's a good thing for all kingdoms in the scenario.
Kingdom C should retal the hit on them.
Under CLI A, kd C can get a pretal from D against A, to help break A's garrison. D will only possibly get land, which is fine because he's happy to help his friend C. Then C can more easily retal A.
Under CLI B, kd C can't get a pretal, so their option is use their retal to take back their castle. If kd C can't break A in a retal with all the odds in C's favor (A has only up to 80% of garrison defending + has much of their garrison away from the attack), then C should learn better kingdom management to be able to defend themselves against such a basic attack.
What you've described is a basic attack scenario that happens whether CLI is active or not. The root problem for C is they're not prepared to defend themselves whether they have a advantage or not, whether they have CLI or not. Theres no excuse in the scenario for C's incompetence, and CLI is not hurting them.