Tracey was appointed as liquidator of Failure Ltd (Failure) on 1 February 2013 as part of a creditors' voluntary winding up that took place by ordinary resolution on the same day. During her investigations Tracey discovered that on 1 June 2012, the board of directors of Failure sold a major item of equipment (a non-current asset) to a company called Hopeful Ltd (Hopeful). Immediately prior to the transfer on 1 June 2012, the company's accounts revealed current assets of $100,000 and accounts payable of $300,000. The accounts payable included a PAYG tax bill of $120,000 from the ATO which was due for payment on 30 March 2012. Further, all non-current assets were subject to fixed and/or floating charges (security interests). The major item of equipment was secured against a loan provided by Jerry, a director of Failure. Jerry was owed $1 million by Failure. Hopeful is a company in which all of the shares are owned by Jerry's son, Dave who is also sole director of the company. The equipment cost $3,000,000 in 2008. With Jerry's consent, Failure sold the equipment to Hopeful for $500,000 and Jerry was paid the proceeds. When questioned by Tracey, Jerry and Dave explained that the transaction ensured the equipment "remained in the family" and the business formerly conducted by Failure "could start over again" with Hopeful, which was "in everybody's best interests". Tracey obtained a registered valuers' appraisal, who values the equipment at $1,500,000 at the time of the sale.

Using ILAC method (include legislation law, common law and cases) Advise Tracey as to whether she has any grounds to recover the property under Part 5.7B of Corporations Act.