Case of the Day: Shanghai Commercial Bank Ltd. v. Chang

The case of the day is Shanghai Commercial Bank Ltd. v. Chang (Wash. Ct. App. 2014). The bank sued Kung Da Chang in Hong Kong for failure to pay on a revolving multi-currency loan Chang had obtained in 2008 in order to facilitate the transfer of investments from the Bank of East Asia to the Shanghai Commercial Bank. Chang counterclaimed for fraud and on securities law claims, and he brought a parallel action against the bank in Hong Kong that asserted claims substantially similar to his counterclaims. In that action, the bank asserted counterclaims equivalent to its claims in the first case. As provided by Hong Kong’s rules of procedure, the bank sought an order requiring Chang, a non-resident plaintiff, to post security against the costs of litigation. After a hearing on the merits of the application for security, the Hong Kong court ordered Chang to provide more than HKD $6 million in security against costs in the parallel action in which it was a plaintiff. When Chang failed to post the security, the court dismissed the parallel claim. Later, the court awarded judgment for USD $9 million for the bank on its claims and against Chang on his counterclaims in the first case. Chang did not appeal from any of the decisions. The bank sought recognition and enforcement of the judgment in Washington under the UFMJRA. The King County Superior Court entered summary judgment for the bank, and Chang appealed.

The court noted that while Chang was sanctioned for failing to post security in the parallel case, the bank was seeking recognition and enforcement of the main case. It found no precedent for Chang’s view that arguments based on the supposed impropriety of the order to post security or the sanction for failure to do so should bear on the entitlement of the judgment in the other case for recognition and enforcement. But the court did not rest its decision on this ground. Even if Chang’s argument on this point was correct, the court held, Chang would still lose.

The main barrier for Chang’s due process and public policy claims was the fact that Washington has a law on posting security very similar to the Hong Kong law that, according to Chang, ledb to a denial of due process. Moreover, Chang did not even attempt to show in Hong Kong that he was unable to post the required security, and he did not appeal. Nor could Chang show that the Hong Kong court was partial to the bank. So the court affirmed.

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