Having a colony with a Town Hall less than 35 but a Palace of Level 10 does not allow for building a Dockyard.
I understand that a Dockyard needs either a Level 10 Governor's Residence or a Town Hall of Level 35.
I've always considered a Palace and a GR essentially the same with the obvious differences. And of course, no one is going to have both a GR and a Palace in the same colony.
So, I'm unsure whether this is a bug or intended - as technically it does state GR only; however, at the very least - if it is intended - I feel there should be a note stating that a Palace is unacceptable in lieu of a GR for meeting this criteria.