Okay, that's interesting. Do you know if your friend simply went to the AMC and asked for a class 1, which if not meeting the criteria for, they were correct to decline. You could argue that it's not the job of the AMC personnel to know what licence/rating/medical an individual has or needs, but simply to undertake the examination as requested.
LASORS 2010 E1 THE INSTRUMENT RATING (AEROPLANE)
Medical Fitness
An applicant for an IR(A) shall be medically fit in accordance with JAR-FCL 3.355(b).
Which says;
JAR–FCL 3.355 Hearing requirements
(b) If an instrument rating is to be added to the applicable licence(s), a hearing test with pure tone audiometry (see paragraph 1 Appendix 16 to Subpart C) is required at the first examination for the rating and shall be repeated every 5 years up to the 40th birthday and every 2 years thereafter.
From the CAA website, medical section (my red);
The medical requirements for a JAR pilot’s licence are contained in JAR-FCL 3 (Medical). There are two standards of JAA medical certificate:
JAR Class 1 for a professional flying licence
JAR Class 2 for a private flying licence
The basic hearing test used throughout JAR-FCL 3 is the ability to hear ‘conversational speech when tested with each ear at a distance of 2 metres from and with his back turned towards the AME’ (JAR-FCL 3.235 and 3.355). This test is done at every medical examination for both professional and private pilots. For professional pilots, and private pilots with an instrument rating, a further test called an audiogram is required
Looks like he could actually have an IR, or at least there's no medical reason not to, this all assumes of course he was honest in what he told you. Was it very long ago?