I understand that you don't. But their lawyers will. It's like I said. If you work for my employer, 1234 City Council, and have a claim against us, we'd be delighted ( albeit disclosing sickness) if you went to work for 6789 County Council. That mitigates our potential loss. Then we just have to deal with the claim. Bye-eee!
But if you worked for, say, Children's Services, and then got a job in Adult Services, that in no way mitigates our losses, and if anything goes wrong with that employment then it could make our risk significantly worse. For example, your sickness in Children's is due to occupational stress caused by poor management and excessive workloads. We can't guarantee the role in Adult Services won't be stressful, and if you suffer further injury then we are in a worse position. But another Council decides that if you can't cope with the workload, that's on you because you assured them, through OH that you were OK.
The issue is context - and obviously I'm pulling examples of of thin air. But I can absolutely think of many reasons why the same employer might be loathe. Not least, given this is CS (and I have union friends who are CS reps, so some awareness of the culture) and parts of it (read, lots of it) have a real tendency to prefer to force you out if you cross them. I get why you want to stay in their employ. But legal settlements often end up with part of them being the parting of the ways.
Given this is CS I suspect it is very unlikely that HR acted as they did without the knowledge and blessing, if not the direction, of legal services.