This week on You Legal TV, we take a look at last year’s Dreamworld accident and directors’ responsibilities in risk management. Watch our summary below or read on our blog for the full details!
Directors’ Responsibilities in Light of the Dreamworld Tragedy
With the police investigation now wrapped up, the Coroner is beginning their independent investigation into the tragic incident at Australia’s popular Dreamworld theme park which claimed the lives of four adults at the end of October 2016. Dreamworld reopened the day after Christmas, two months after the tragedy.
The accident has drawn intense public scrutiny over the executive management of Dreamworld. Until the coroner releases their report, which may still be some time away, it is not appropriate to speculate as to the causes or otherwise of the Dreamworld tragedy. Such a tragic loss of life naturally casts all other potential consequences into the shadows, but this tragedy should also serve as a timely reminder for directors to consider their personal responsibility for managing risk.
Corporations are, of course subject to significant legislation dictating minimum compliance and operating standards for the protection of stakeholders – from shareholders and creditors to employees and customers. Corporate fines are significant and act as both deterrent and restitution, but corporations do not make decisions. People do.
Directors are expected to carry out their duties with reasonable care and diligence. A failure to do so attracts the penalty provisions of the Corporations Act 2001 (Cth). Penalties include disqualification from acting as a director, significant fines and orders to personally pay compensation.
While these provisions are not insubstantial, they are predominantly designed to protect shareholders and ensure the profitability of the company.
The Corporations Act however, is not the only suite of legislation to impose personal liabilities on those at the helm of a company.
The most notable in this regard is Workplace Health and Safety (WHS) legislation. An officer found to have committed a tier one offence, that is, has recklessly engaged in conduct that exposes someone to injury or death is personally liable to a maximum penalty of $600,000 or five years imprisonment. A tier two offence involving a failure to exercise due care and diligence may attract a fine of up to $300,000.
It is important to note that under the WHS legislation these personal liabilities arise for officers of the company, including directors, senior management and workplace health and safety officers.
To discharge their duties under the both the Corporations Act and the WHS legislation, directors are required to participate in the management of their company. This means keeping abreast of all risks in their operations, making appropriate enquiries as to processes and control procedures and ensuring that those with boots on the ground are complying with all safety processes, engaging with employees, responding to WHS concerns and providing adequate funding to address those concerns.
Dreamworld’s directors will be under intense scrutiny in the coming months as the coroner investigates all possibilities, from unforeseeable mechanical breakdown, to non-compliance and a failure to discharge their duty of care.
While the outcome remains to be seen, nothing will bring back those who lost their lives. For those of us at the helm of a company, it serves as a stark and timely reminder to not just be aware of our responsibilities, but to wholly fulfil those responsibilities with due care and diligence.
As every business leader knows, risk is involved in every business decision made. It’s an uncertain world out there, and there a myriad of ways unforeseen events can affect your business. With the proper plans and processes in place, you can reduce the impact of these events and ensure the longevity of your business.
What Should I Do Next?
Contact us if you would like further legal advice on directors’ responsibilities, or developing Risk Management and Compliance programs. Our lawyers at You Legal will be happy to assist you in whatever way we can.
* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.