I have no issue with testing as part of a recruitment process but it should be a single input into the overall decision and certainly shouldn't be able to override other more significant factors.

In this instance a reasonable compromise would seem to be to have the HR manager state what the specific issues they felt might exist were and call the candidate back to talk through them and see if they could be substantiated. If someone was that bad a fit then I doubt very much it would be hard to surface supporting evidence in a face to face discussion.