It appears that you are in a bit of a quandary, and whilst you might get certain pointers here, you really need someone local to get involved and advise specifically.
Yes there will be "look at this", and "check that" comments, but you need the whole scope of the work looking at in context of the site, and local planning policy
There are three issues
1. Is the conversion actually PD or not?
2. Could it be accepted via a full planning application?
3. What recourse is there against the designer and builder
*****
1. Someone needs to check whether the work is actually PD or not. The council may be wrong and there could be reasons (past precedent) as to why they are wrong.
There is also the option of appeal against their decision
2. Just because the council refused a LDC application does not mean that you can't apply for full planning permission
If so, the council will assess the work against slightly different criteria, and permission could be granted that way.
3. If the worse comes, then you have legal redress against the designer and the builder.
There is an implied duty for the designer and the builder to have 'professional knowledge' of their work, and advise the client accordingly. The designers duty is obvious (ie he should know all about planning issues) but in addition, the builder can't pass the buck as he has an equal duty not to do work which is contrary to planning regulations - he can be held just as liable.
With regards to 1 and 2, there are appeal processes, so it's not a cut and dry case.
You do need someone knowledgeable in planning law to advise you now. This would normally be a planning consultant rather than a bog standard plan drawer or Architect.
Check your home insurance to see if you have any legal assistance cover