Pollak v National Australia Bank Ltd

In the case of Pollak v National Australia Bank Ltd, the appellant sought to have a sequestration order set aside, which was made by Madgwick J, and in its place, an order dismissing the creditor’s petition presented by the Bank. The underlying dispute arose from a loan taken by Mrs Pollak in 1986, which Dr Pollak and Mrs Stern assumed liability for after her death. The Bank obtained a judgment in California for $US 3.8 million plus interest and costs against Dr Pollak and Mrs Stern in 1996. The Bank applied to enforce this judgment in Australia, leading to various court proceedings and orders, including a Mareva injunction preventing the disposal of certain assets.

The legal issues in this case centred on the interpretation of an agreement between the Bank and Mrs Stern, particularly whether this agreement operated as a release of the entire judgment debt or merely Mrs Stern’s share. The Bank argued that the agreement was intended as a covenant not to sue rather than a full release, while Dr Pollak contended for a full release. The court had to determine the nature of the agreement and its effect on the judgment debt.

The court found that the common law rule applied, which states that the release of a number of co-debtors jointly or jointly and severally liable for the same debt releases all. However, the court also considered whether the agreement in question was a release or merely a covenant not to sue, a question of contract construction. The court examined the language and surrounding circumstances of the agreement to determine its true nature. Ultimately, the court concluded that the agreement was indeed a release of the entire judgment debt, as per the common law rule, and dismissed the appeal. The respondent's costs were to be taxed and paid from the estate of the appellant in accordance with the Bankruptcy Act 1966 (Cth).