I've had a hard time trying to figure out what causes the quest to break, as I've had saves where it worked, then after playing 2 or so minutes, the quest fails to appear, even with the exact same equipment on both saves.
I've tried engaging in combat with some other blue (fine) quality enemy before Thallia, and all other sorts of things to try and find out what prevents it from triggering correctly, but I haven't had much luck in trying to find an exact trigger just yet. Whatever the case, it's not limited to just already having fine quality gear, or even high enough ranking gear.
At the very least I think it shouldn't be counted toward the completed all sidequest achievement, as at the very least, it's unpredictable as to if you can even get that quest based on unknown factors (beyond just already having good gear)