It appears that the selection was based on division at the start of the season, and regular season wins and losses and losses the previous season. Few if any teams that relegated from D.II were included in the cup. This is especially harsh in Australia since there are almost no other human teams in D.III.
If BB is going to restrict the field, they should first consider human-hood, then last season division and record. If Australia were full, this would some 6th place teams and all the 7th and 8th place teams in D.III (of course if D.III were that full, there would be a D.IV).
Better yet would be to include all teams, and have a preliminary round on the Thursday before the league season started.