Starfire Ltd (Starfire) is a company involved in the mining and resources industry in

Western Australia, particularly gas exploration. The non-executive chair of Starfire's

board of directors is Perry, who also serves as chair of the audit and risk

management committee of the board. Perry had extensive experience in auditing

and financial accounting prior to retiring as an accountant to take on board positions.

However, Perry lives in Sydney and tries to avoid travelling to the company's head

office in Perth as much as possible. The managing director and chief executive

officer of Starfire is Harry. The three remaining directors are all non-executive

independent directors, including Hien a wealthy Perth business woman with interests

in several listed and unlisted companies. The company's shareholders are a mix of

employees and outside shareholders. Harry and Hien own 10 and 20% of the shares

respectively.

Starfire's main asset consists of rights to explore and exploit potential coal seam gas

reserves in the northwest of Western Australia. The market for gas has boomed in

recent times, and companies with gas assets are frequently the subject of takeover

activity as large overseas energy companies seek to guarantee supplies into the

future. The extensive market interest in coal seam gas presents an opportunity for

Starfire to expand its operations and hopefully attract either a friendly takeover that

will deliver big returns to shareholders or a big contract with an overseas customer

that will provide increased revenue. Another option is to list on the ASX.

The company needs further funds in order to exploit its commercial opportunities.

Harry is very active in seeking out funding opportunities to enable Starfire to expand

its operations, but finds little support from the banking community who are already

over-extended in their loan exposures to the mining and resources industry and

Harry has been unable to attract further loan funding from banks and informs the

board that he will continue to explore funding opportunities.

Hien is approached by a friend (Rocco) in Perth about a potential investment

opportunity. Hien includes Harry in the subsequent discussion. Rocco's proposal is

to expand on an existing gas exploration venture (RoxCo Pty Ltd) that is situated

close to Starfire's operations. Rocco believes that combining RoxCo with Starfire

could provide mutual benefits. However, Hien and Harry have different ideas and

reject this proposal to combine the business interests. Harry also spoke to Perry

about it and Perry expressed some doubt about the projected benefits.

Hien and Harry believe that Starfire won't succeed in the long term due to

inadequate funding. Hien and Harry set up a new company JCo Pty Ltd, and

propose that JCo enter into a joint venture with RoxCo. Hien funds this new venture,

which is notionally run by Zach as CEO, but in reality it is Harry that is in charge as

Zach only ever acts on the instructions of Harry. Harry mentions in passing to Perry

that he was doing some part time consulting for a friend in another company in

Perth. Perry is engaged by JCo to give some financial advice and receives $50,000

for this work, which is not declared to Starfire. Over the next year the joint venture is

spectacularly successful and its value exceeds $500 million. JCo's shareholders are

Hien (80%) and Harry (20%) so they have both made a lot of money from this

venture.

Question 1: Advise Starfire as to what rights and remedies it may have against

Hien, Perry and Harry based on the above facts.