Ok this was interesting.
when setting group association by zwave config panel it will default to 0 for target.
First remove the previous association in Group 1 with service: zwave.change_association and JSON:
{"association": "remove", "node_id": NN, "group": 1, "target_node_id":1}
(replace NN with your Node_id)
then call zwave.change_association again with:
{"association": "add", "node_id": NN, "group": 1, "target_node_id":1, "instance":1}
(replace NN with your Node_id)
setting instance id to 5 sorted the issue and group association now works perfectly.
Thanks to Fibaro for good support even though it took 3 months to get reply from them.