Cessna - Section 3, the navex, is (usually) the second part of the flight profile. The first part, Section 1, being the "Departure".
You should not "fail" a test - and certainly not be told so in flight (with the question "would you like to continue") - unless you had already failed Section 1 prior to/or during, the departure.
You have to fail at least one item in each of two sections before test terminate and option to continue.
Whilst I grant you that, as you said yourself, the decision is made before departure that some tests are likely failed for administrative and/or financial purposes, you may have a valid case of appeal especially if the examiner did not clearly inform you of Regulation 6.
Was this a staff examiner, or freelance? Want to PM with some details?