Hi JP and JP’s wife,
A late response I know but…
You say…
“we pricked them out and moved them into individual modules just before the first true leaves start appearing.”
How did you do this? The reason I ask is that it is usual to wait until the first true leaves have appeared and the cotyledons have fallen off before pricking out.
The seedling is then pricked out by holding one of the true leaves, easing the roots out with a small pointed thing (we use plant labels) and then transferring the seedling to its new home still holding the true leaves. The stem of the seedling is NEVER handled as this is extremely sensitive to damage.
What you describe is classic damping off, which is a fungal disease. We minimise this by using absolutely sterile composts and sterilised seed trays/modules (we use Citrox). Also we never water pricked out seedlings from the top. We always soak transplanted seedlings from the bottom. Then leave them in a well ventilated cold frame or glass house for a week before moving them elsewhere.
Hope this helps.