If:
(a) pension is payable, or has been paid, under this Part in respect of:
(i) the incapacity of a veteran from a war - caused injury or disease; or
(ii) the death of a veteran; and
(b) damages have been awarded against the Commonwealth:
(i) to a veteran in proceedings instituted to recover damages in respect of the same incapacity of the veteran from that or any other injury or disease; or
(ii) to a dependant of a deceased veteran in proceedings instituted to recover damages in respect of the death of the veteran; and
the liability of the Commonwealth to pay those damages (excluding any part of them that represents expenses incurred in medical or hospital treatment) is taken to have been discharged to the extent of the total of the amounts of the pension that have been paid to the veteran or the dependant.