If no hits are inflicted, then you shouldn't roll for any drivebacks...
If no hits were inflicted on 'c', then yes, c can elect not to make way, and 'a', which would otherwise be confused in another army, is not affected confusion-wise b/c undead don't suffer from confusion. This is one of the advantages of the undead.
If casualties are inflicted on both 'a' and 'c', then you'll drive them both back, b/c there's no unit to stop 'c' from getting driven back. If 'a' is driven back farther than 'c', then 'c' can prevent 'a' from being driven back farther than 'c'. (I'm getting a headache from all this a and c business). Your opponent's solution seems a bit "gamey": there are a lot of events in WM that depend on sequence, but I don't think this should be one of them.