The Accepted Answer is only half the answer. The problem I found with the one-click Dokku droplet for Ubuntu 16.04 is that the the source URL for Dokku in the dokku.list isn't correct and therefor wasn't getting the newest versions of Dokku, herokuish, sshcommand and plugn.

To fix this:

1. ssh into your droplet
2. Edit the dokku.list sudo nano /etc/apt/sources.list.d/dokku.list
3. Change xenial to trusty and save

dokku.list should look like this:
deb https://packagecloud.io/dokku/dokku/ubuntu/ trusty main

Once done, follow the recommend updating from Dokku:

sudo apt-get update
dokku apps
dokku ps:stop APP # repeat to shut down each running app
sudo apt-get install -qq -y dokku herokuish sshcommand plugn
dokku ps:rebuildall # rebuilds all applications