Corporate Law Report: Ardent Leisure and Dreamworld Incident Analysis

This report examines the corporate governance failures related to the Dreamworld incident, where a tragic accident occurred at the theme park. The report analyzes the responsibilities of the Board of Ardent Leisure in recognizing and managing risks, particularly in relation to the safety of the rides. It discusses the application of ASX principles of Good Corporate Governance and identifies breaches of director's duty of care and diligence. The report highlights specific instances of negligence, such as inadequate restraints on the rides and improper maintenance. Finally, it explores how the board can improve the company's risk management framework to prevent future incidents, emphasizing the importance of ethical and responsible corporate behavior, and the need for effective communication with stakeholders. The report uses various legal references to support its claims.

Running head: CORPORATE LAW
Corporate Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Table of Contents.............................................................................................................................1
Introduction......................................................................................................................................2
Answer to Question A.....................................................................................................................2
Board of Ardent Leisure recognise and manage the risk arising from this incident...................2
Answer to Question B......................................................................................................................4
ASX principles of Good Corporate Governance.........................................................................4
Answer to Question C......................................................................................................................6
The directors had breached their duty of care and diligence.......................................................6
Answer to Question D.....................................................................................................................7
Board review and improve the effectiveness of the company’s risk management framework...7
References......................................................................................................................................10

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Introduction
Corporate Governance is a set of laws, guidelines and procedures used inside the office in
order to maintain a good corporate culture in the organization so that the company is able to meet
up with the entire requirement. It is able to grow a good relationship between the company and
the stakeholders thereby maintaining a long-term sustainable relationship.
The directors, the Chartered secretary and the managers are able to achieve the good
corporate balance and culture by following certain rules within the organization. Good corporate
governance helps in the improvement of the organization growth and gives a high integrity and
standard. The factors, which contribute to the good corporate governance, are as follows:
The directors- The directors plays a vital role in the improvement of the organization and the
overall growth and the directors are the decision makers and whatever decision they take depend
the overall growth and success of the organization1.
The shareholders of the company- Shareholders play a vital role in the growth of the
organization, since they contribute to the capital of the organization. They are considered to be
the primary owners of the organization, since they contribution money in the organization. In
return, of the capital contributed by them they expect huge dividends from the company.
Stakeholders of the company: The stakeholders or shareholders are the lenders of finance, the
government organization. The Stock exchange and the financial institution, the employees the
suppliers of raw materials and the lenders and the people at large, from whom the company is
also dependent
1 Jaatun, M. G., Pearson, S., Gittler, F., Leenes, R., & Niezen, M. (2016). Enhancing
accountability in the cloud. International Journal of Information Management

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The community: The whole community, the society help in the upliftment of the company.
The system of corporate governance is set of laws by which the organization is directed. It is a
set of procedures and regulations by which the company can balance the interest of all the
contributors and the people related to the company. They are the suppliers, shareholders, lenders,
customers, the financial institution, and all the people.
Answer to Question A
Board of Ardent Leisure recognise and manage the risk arising from this incident
The Board of Ardent Leisure who was the owner of Dream world went into crisis after
the disaster in 2016. There was a tragic incident and the people were killed. The incident
occurred on the thunder river rapid ride. It is one of the biggest attractions for the tourist. That
incident occurred due to the vessel that was not working according to the report said. The
company that owns the dream world park was responsible for the accident. They were required
to maintain the rides and then needed to ensure that the people who were riding the ride was safe
and thus the rides in the park are functioning properly. The company needed to ensure the health
and safety of the tourist who were riding the thunder ride.
After investigation it was found that the ride was not maintained and kept properly fort the last
four years. The workers were informed that the theme park Dream World did not have proper
management and maintenance. There has been number of problem and concerns that was raised
to during that time2.
2 Harris, J. Hargovan, A. Adams, M., Australian Corporate Law LexisNexis Butterworths 5th
edition, 2015

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The directors and the management said that the tourist were aware about the risk at the time they
were taking the ride. But this is not a justification that the company will not maintain the rides
and they will ensure the safety of the tourist so that they can avail the ride being aware that it is
risk free. Thus it has been the fault of the organization that they failed to maintain the safety of
the tourist. Due to their mistake and negligence the tourist faced this terrible accident. The
disaster was very grief in nature and this caused a huge damage to the organization and the
company had to pay a huge financial penalty, since they were not able to recognise and manage
the risk arising from this incident3.
Answer to Question B
ASX principles of Good Corporate Governance
The principles stated in the governance highlight the rights and responsibility that is
distributed among the various participants that is in the corporation. It includes that the
procedures that the rules that the regulation of decision making in the corporate affairs through
corporate governance. It also includes that the processes through which the objectives of the
corporations are set and followed in the social, market environment and regulatory context. The
mechanisms of governance include monitoring the actions, practices, decisions and the policies
of the companies, its agents and stakeholders4.
Discussion
3 Redmond, P., Companies and Securities Law - Commentary and Materials, Law Book Co.,
Sydney, 5th, 2013.

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“The practice and structure of corporate governance is an important and continues to be
important in the determination of the director’s liability for breach of ASX principle of corporate
governance. In the assessment of the corporate governance practices, Australia commences from
a position of strength. It is however important to seasonally review the practices of the directors
and the management so as to promote high standards of transparency about the practices of
corporate governance of listed entities5.The council gives the listed companies the flexibility to
adopt alternative practices of corporate governance, if considered suitable depending on its
requirement”6.
Corporate governance ensures that the risk of the board and the responsibility that the
company can comply with those regulations and the board shall comply with all the laws. It
ensures that the board gets the information, which will enable them to do their work efficiently
and effectively. It enables to communicate thus it ensures proper flow of information and is able
to communicate with all the stakeholders. It will thus evaluate the performance for the executive
officer and throw opportunities to the board to run his organization efficiently. It improves the
skill, competencies required for the people to the task. There is a policy and training programs,
which will help in the improvement of the board and help at the board to perform better
45 Hanrahan, P., Ramsay I., and Stapledon, G. Commercial Applications of Company Law. 14th
Ed CCH. 2013. p 49
5 Fisher S, Anderson C, Dickfos,. Corporations Law - Butterworths Tutorial Series, 3rd
Ed. Sydney, Butterworths. 2009. p 201
6 Davenport, S and Parker D,. Business and Law in Australia, Thomson Reuters. 2012. p 15

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Answer to Question C
The directors had breached their duty of care and diligence
The directors and the management had done breach of their duties since they did not have care
and diligence for the proper maintenance of the rides. This posed significant loss of the company
since the event was tragic
The reasons are as follows:
Reason 1 - The riders were not adequately restrained against being thrown from the raft. All four
riders who were killed were thrown from the raft. The restraints in the raft were a lap sash
seatbelt and a bar to hold. There should have been a double shoulder harness, as in roller coaster
rides 7.
Reason 2 - The conveyor belt which was lifting the raft had been unsafely modified. The
conveyor belt lifted the rafts at the end of the ride to the start of the ride loop. The accident
occurred because the raft in front had got stuck at the top, and when the fatal raft hit it, it flipped.
Reason 3 - The normal practice is that attendants are stationed in line of sight positions along
rides in theme parks. They have the ability to stop a ride if they see something wrong. It is not
known if an attendant was watching the conveyor belt on this ride.
Reason 4 - There was no separator to prevent rafts from colliding with each other on the
conveyor belt. It is normal for rafts/cars to be kept separate with a separator.
The Dream world theme park was closed for 45 days, resulting in a financial loss for its owner
Ardent Leisure, including a 44.5% drop in earnings to 30th June 2017.
7 Cassidy J., Corporations Law Text and Essential Cases. Federation Press, 4th edition Sydney
2013

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Answer to Question D
Board review and improve the effectiveness of the company’s risk management
framework
The type of governance and the practices that a company or the organization chooses to
adopt is basically a matter that the board of directors and also the top management is charged
with all the legal responsibility of managing its businesses with the due care and the diligence8.
The management is therefore charged with ensuring that the company is appropriately governed
and has appropriate governance policies in place. Under these recommendations and principles, a
listed companies has board which considers that the recommendations of a council is
inappropriate to its particular situation, it is free not to adopt it. In case there is failure to adopt it,
then it must elaborate clearly why it has not adopted the recommendation. This is what is
referred to as the ‘if not, why not approach’9. “The need for this explanation is to ensure that the
market receives an appropriate level of information about the company’s governance
arrangement. This will ensure that: security and other stake holders in the entity in question can
get the opportunity to have a conversation that is meaningful to with the company’s management
on matters of governance. The holders of securities can use these information obtained on
decision making and how to vote on particular resolution. Investors can also use the information
8 Lipton, P., Herzberg, A., and Welsh, M, Understanding Company Law, 17th Ed. Thomson
Reuters 2014. 210
9 Harris, J. Hargovan, A. Adams, M. Australian Corporate Law 4th Ed. LexisNexis
Butterworths. 2013. p 105

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to determine whether or not to invest in the securities of the company10. This approach is vital to
the principles and recommendations operation”11.
“The principles and recommendations apply to all the companies that are listed,
irrespective of the legal form that they take, or whether or not they are established within
Australia or another place, or even if they are companies managed internally or externally. Some
of the recommendations need to be modified when they are applied to companies that are listed
and externally managed”.
“The principles and the recommendations are directed specifically to, and only intended
to apply to those companies that are listed in the ASX. However, as they give a contemporary
perspective of the appropriate corporate governance standards, other different bodies may get it
useful in setting up their rules of governance or practices”.
The principles and recommendations which are structured and that seek for the
improvement of some principles. These principles are to be laid that a foundation that is solid for
the management that has and the oversight. This means that a listed company should establish
then disclose the respective responsibilities of the managements and how their behavior is
monitored and evaluated12. “The boards structure in value addition; a company that is listed
should have an appropriately sized board, composed, and with relevant skill and commitment to
help it in discharging its duties effectively. The other principle is to act in an ethical and manner;
10 Fitzpatrick, Synes, Veljanovski, and Parker,. Business and Corporations Law; 2nd Ed.
LexisNexis. 2014 p 387
11 Parker, Clarke, Veljanovski, Posthouwer, Corporate Law, Palgrave 1st edition 2012
12 Austin R.P. and Ramsay, I., Ford's Principles of Corporations Law, 15th Ed. Butterworths,
Australia. 2012. p 201

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a company that is listed has to act in an ethical and responsible way. Another principle is to
safeguard its integrity in corporate reporting; a company that is listed must have formal and
punctilious processes which verify and also safeguard independently its corporate reporting
integrity”13.
13 Hoad, Richard, and Ian Ramsay. "Disclosures!: Corporate governance in practice." (1998):
10.

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References
Austin R.P. and Ramsay, I., Ford's Principles of Corporations Law, 15th Ed. Butterworths,
Australia. 2012. p 201
Cassidy J., Corporations Law Text and Essential Cases. Federation Press, 4th edition Sydney
2013
Ciro T, Symes C, Corporations Law in Principle LBC Thomson Reuters, Sydney, 9th edition
2013
Davenport, S and Parker D,. Business and Law in Australia, Thomson Reuters. 2012. p 15
Fisher S, Anderson C, Dickfos,. Corporations Law - Butterworths Tutorial Series, 3rd Ed. Sydney,
Butterworths. 2009. p 2015
Fitzpatrick, Synes, Veljanovski, and Parker,. Business and Corporations Law; 2nd Ed. LexisNexis.
2014 p 387
Hanrahan, P., Ramsay I., and Stapledon, G. Commercial Applications of Company Law. 14th Ed
CCH. 2013. p 49
Harris, J. Hargovan, A. Adams, M. Australian Corporate Law 4th Ed. LexisNexis Butterworths.
2013. p 105
Harris, J. Hargovan, A. Adams, M., Australian Corporate Law LexisNexis Butterworths 5th
edition, 2015.
Hoad, Richard, and Ian Ramsay. "Disclosures!: Corporate governance in practice." (2013): 10.
Hoad, Richard, and Ian Ramsay. "Disclosures!: Corporate governance in practice." (1998): 10.
Jaatun, M. G., Pearson, S., Gittler, F., Leenes, R., & Niezen, M. (2016). Enhancing
accountability in the cloud. International Journal of Information Management

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Li, G, Riley, S. Applied Corporate Law: A Bilingual Approach 1st Edition LexisNexis. 2012. p 112
Lipton, P., Herzberg, A., and Welsh, M, Understanding Company Law, 17th Ed. Thomson Reuters
2014. 210
Parker, Clarke, Veljanovski, Posthouwer, Corporate Law, Palgrave 1st edition 2012
Redmond, P., Companies and Securities Law - Commentary and Materials, Law Book Co.,
Sydney, 5th, 2013.