Peplink router answers DNS requests with proxy off

We are working in a customer environment and have been asked to route all DNS requests through their DNS servers. However, we’ve found that some client devices like to hit the gateway with DNS requests that they don’t get an answer to via the corporate DNS. More concerning is that the Peplink router (on 8.6.1) actually responds to those DNS requests with all DNS settings including DNS Proxy fully disabled.

Is this expected behaviour? If so, why?