Schmidt J detailed s 323, its forerunner 1987 Act s 68A, and authorities Matthew Hall PL v Smart  NSWCA 284; (2000) 21 NSWCCR 34 at [29-32]: necessary that pre-existing condition contributed to loss; Government Cleaning Service v Ellul (1996) 13 NSWCCR 344 at 349: provision not concerned with pre-existing condition not causing permanent impairment; D’Aleo v Ambulance Service of NSW (NSWCA, 12.12.96, unrep): age degeneration contributing to impairment deductible.
Arbitrator McManamey had dissented.
Her Honour considered reasons of the panel’s majority, Drs Roger Pillemer and Sophia Lahz, essentially that the deduction was appropriate because the worker’s first surgery, even without symptoms, would generally attract 10% WPI under AMA 5 and the Workcover Guides.
Schmidt J said : “S 323 does not permit that assessment to be made on the basis of an assumption or hypothesis, that once a particular injury has occurred, it will always, ‘irrespective of outcome’, contribute to the impairment flowing from any subsequent injury.
"The assessment must have regard to the evidence as to the actual consequences of the earlier injury, pre-existing condition or abnormality.
"The extent that the later impairment was due to the earlier injury, pre-existing condition or abnormality must be determined.
"The only exception is that provided for in s 323(2), where the required deduction ‘will be difficult or costly to determine (because, for example, of the absence of medical evidence)’.
"In that case, an assumption is provided for, namely that the deduction ‘is 10% of the impairment'. Even then, that assumption is displaced, if it is at odds with the available evidence."
"That is a matter of fact to be assessed on the evidence led in each case."