A recent case – beware!

Yesterday we received a request for assistance from a foreign lawyer in connection with a commercial transaction involving a Quebec company. The email was short, concise and seemed perfectly legitimate. We began our approach by checking whether the lawyer in question was featured on the website of his purported law firm and whether the sender’s email address corresponded to that indicated on the firm’s website, and it did.

This so-called “lawyer” also asked us to do a conflict search, which we did. His “client”, a foreign enterprise, actually exists and is in the business of selling heavy machinery. The purported buyer is also an existing company, with a place of business in Quebec, and it too is engaged in the heavy machinery business. Here again, Internet research yielded information corroborating that in the email. The relevant corporate registers also confirmed the information we had received. So far, everything appeared legitimate.

After confirming there was no conflict of interest, we were asked to prepare a mandate letter with our firm’s terms and conditions. In order to get a better understanding of the potential mandate, we asked for details of the proposed transaction. The “client” then sent us a copy of a “Letter of Intent” that appeared to be signed by legitimate representatives of the two companies involved (seller and buyer), according to the corporate registries. The Letter of Intent gave an overview of the transaction and, once again, appeared to be perfectly legitimate. We were then asked to draft the deed of sale in accordance with Quebec law.

The issue that bothered us was the following: the Letter of Intent provided that the Quebec buyer, after inspecting the machinery, had to confirm whether or not it wished to proceed with the transaction. If it did, the buyer had to deposit in our trust account an amount equal to 25% of the purchase price. Our fees and disbursements were to be deducted from this non-refundable deposit, and the balance was to be transferred to the seller upon request, regardless of whether the transaction was consummated or not. While proceeding in this manner may be legal in the right circumstances, including that all conditions are fulfilled and the consent of the parties is clear and unequivocal, we were uneasy about our trust account being used this way, in a transaction where we did not know the parties.

After discussions with some colleagues, who shared our misgivings, we scrutinized the information we had received somewhat closer, and noted that a hyphen had been inserted into the seller’s email address, which the legitimate business did not have, and that the telephone numbers, while similar, were not identical.

Because of the difference in time zones, we had to wait until the next day to confirm our suspicions by speaking with a representative of the foreign company that was the purported seller. The legitimate company confirmed that its identity had been assumed, but unfortunately was unable to identify the perpetrators of this attempted fraud, which all in all was very clever and quite sophisticated.

Luckily, all that was lost on our side was some of our time. So be on your guard!