Well after a years break I’ve had another go at Happy Birthday today. Took me about 5 mins to figure it out (just about!). Perhaps my ears aren’t as bad as I thought! 
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@Stuartw Great news Stuart!
What has happened is that your musical ear has started to develop without you putting any conscious effort into it.
By listening to music and listening to your guitar, your mind is starting to recognise and separate the different sounds.
It will continue to develop as you continue doing what you’re doing. 
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Struggling quite a lot starting out ear training, but 2 cents: at the end of the beginner’s course grade 1, it seems preferable to recommend the Practical Music Theory first before this since I feel like I was wandering around blind on the fretboard with this training by ear prior to doing the first lesson of that and more fully understanding how the notes progress down a string (and then on my own exploring how each string’s notes relate mostly matching up at the 5th fret to the next string down, 4th for G->B). This context about the layout of the fretboard seems helpful towards playing by ear to recognize how many frets you need to get every note across 2 or 3 strings to form a box for where it makes sense to play.
Maybe this will seem less impactful as my ear improves, but just felt like I was floundering based on these lessons without some understanding of the fretboard.
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Hi Tim @helloItsTim, welcome to the community! When you have a minute, maybe pop over here and introduce yourself.
Your comments resonate with me. I’m currently consolidating Grade 2, and have done the first few grades of Practical Music Theory. Knowing if notes are a tone or semitone apart certainly helped me understand and memorize the location of intervals on the fretboard. Yet I still struggle mightily with Play What You Hear! The parts of my brain that understand theory and hear music haven’t connected yet. Of course, I’m not saying my brain is typical. 
I’ll just keep at it, I’m sure it will click eventually!
I have absolute pitch so I can reproduce notes (vocally) with ease but can’t spot notes on the fretboard other than those of familiar scales (C maj and A min Pentatonic) taught within Grade 2 . What I know so far is that any song is based in a certain Key for example Happy Birthday is in C maj (Justin’s version). So I guess it suffices to know C maj everywhere on the board but that’s what rather intermediate guitarists learn I guess, so would this exercise help to develop a vague intuition of knowing where the other scale shapes are?
PS: Even as Grade 2 consolidator, I tried improvising over the board other than staying in a box. I hope this exercise gives a boost to my accuracy
@spath051
Welcome to the community.
That’s a rare skill, absolute pitch.
Perhaps not the best person to advise but my suggestion is to learn the notes on the fretboard. There are five scale patterns but to learn and play them when you are at Grade 2 would be quite a task.
You mention playing Cmaj all over the fretboard, to do that you would have to play barre chords in all of the five CAGED shapes, that is well beyond Grade 2. I think Justin only covers E and A shapes.
Hopefully somebody with more experience will contribute
Michael
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That’s cool, but of course you don’t need absolute pitch to reproduce notes vocally, but anyway…
You don’t need to know any scales or anything about notes on the fretboard to do this exercise. The idea is to simply find a melody that you already have in your head on the guitar. You do this by trying different notes and seeing if they reproduce the melody that you know.
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Thanks for the input! I realised no matter from where you start a melody there’s always a pattern and most span over 4 frets . So the question is when to move on? Once I’m able to play it fluently or this is just a long term exercise and i try some other Melodies too