I can tell you for sure if you used the retreat button your troops will spread always if the home city port is occupied.
If you want to send troops to fight you should click on the home city(from island view) and click send fleet that way the ships will go to battle.
that's perfect answer
but i don't know why when your city is occupied, you can't use the retreat button!
in this case you cant came back your troops or ships to your city without fight!
this is really ridiculous!
at the past years you could use the retreat button when your city was occupied.your army was returning to your city after 4 hours spread.