You can have situations where you are prepared to recruit someone with potential versus being the final article. In those situations the overqualified candidates may not compare well with what you consider the potential of the slightly under-qualified candidate, and may not have some of their other attributes. It's obviously a risk, but it happens more than people think.

Still, overqualified candidate supersets qualified/unqualified. He/she should pass the test.

Failure of recognising overqualified candidate from under qualified is a failure on the recruiter side, not the candidate side.

Recruiter is of course allowed to say "I'm sorry, but you are well overqualified for this position". In this case he was falsely recognised as somebody under qualified.