Why did the circuit breaker fail to detect the short circuit/ overloading?

All that matters is that the wire can handle the ampacity of the circuit breaker. It doesn't matter one bit how much larger the wire is than it needs to be. For overcurrent protection, if the load is pulling more amps than the circuit breaker is rated for, the circuit breaker should trip. If there is a short circuit or ground fault, the breaker will trip regardless of the wire size.

The circuit breaker was too far away from where the short circuit happened