That does sound like unprofessional behaviour on the part of the examiner, if true, both in allowing the flight to be completed and in failing to offer a thorough debrief.
As examiners I know have explained to me, every test is also a lesson and the candidate should learn something. This is most obvious for a test the candidate has failed. How is cookiimonster to learn without a good debrief? How does he even know if he is ready for a retest, or what to study further if not?
The examiner would need to allow the student at least to start the second section of the flight, probably the navigation leg, to decide it was a fail; had cookiimonster then set the QNH to the examiner's satisfaction he could have continued and perhaps gained a partial pass, and had to refly the departure section. Failing two sections is a fail, so as soon as cookiimonster started on his navigation leg with QNH not set to the examiner's satisfaction the examiner should have stopped the test and flown the aircraft himself back to the airfield.
By not stopping the exam at the point of failure the examiner himself has muddied the water. In a balance of probabilities, if the court is persuaded the test should have been stopped earlier but wasn't then the balance of probabilities goes to cookiimonster. I for one would suspect that the examiner didn't notice until near the end of the test. This implies either that he was not very attentive, that the subscale was too small and perhaps set between figures or else the subscale had somehow been knocked, and the student was either not at fault or might have deserved a partial pass.
The CAA has given cookiimonster a free retest. From their point of view this is the worst thing to do. They have admitted that cookiimonster at least has a case, and might have been correct. Yet cookiimonster is still out of pocket for the aircraft hire, and the examiner compounded this by making cookiimonster fly longer than necessary. They then did not cancel the first attempt, which is I think the least of the offences but brings in pride.
This is all, of course, only my inexpert opinion. However I know a very good expert witness, who has instructed CPLs and IRs, who has worked a few legal cases and always gives his honest opinion regardless if that is what the client wants to hear. If he agrees with me I would say you have a strong case, and he might be able to stand up in court and give that opinion too.
That should be your first move, though, to talk to a court-accredited expert witness. There are some poor ones around, it is not a great system, so be careful who you pick and emphasise that sound advice is more important than building a case. I know of one individual who lost a lot of money because his expert witness persuaded him he had a case, and the company he sued disagreed. Any objective person could have told him he did not have a leg to stand on, and he ended up paying a lot of costs, for both sides.