The DAME or AME is not in many cases a consultant or specialist in that field but is trained to interpret the Authority's requirements, so the psychiatrist may simply be wrong. Indeed it is possible the DAME sent the report to CASA whose own psychiatrist reviewed it and the Authority then issued the medical.
I think this is highly possible.
Hypothetical:
Is it possible that many of us bemoan the fact that those b@stards at AvMed "stop us flying", then, in a situation where they (perhaps) do the opposite and give someone the tick in the box, we go "Oh, look how reckless AvMed are!"?
Obviously there would be questions to be asked about company influence, etc, etc...
Just putting it out there...