Clarifying the Scope of Discovery in Contractual Guarantee Disputes: The Rule 7 Relevance Principle in Short Brothers PLC v AAR Corp

Introduction

Short Brothers PLC v AAR Corp ([2025] NICA 18) was heard in His Majesty’s Court of Appeal in Northern Ireland on 4 April 2025, following an interlocutory decision by McBride J in the High Court (King’s Bench Division, Commercial Hub) on 8 October 2024. The core dispute arises from a performance guarantee given by AAR Corp (“the Defendant/Appellant”) in favour of Short Brothers PLC (“the Plaintiff/Respondent”) to secure obligations owed by AAR Composites (later novated to Aeromatrix) under a 2009 flap‐track fairings procurement contract. The Defendant sought an order for extended discovery of documents, invoking Order 24 Rules 2(5) and 7 of the Rules of the Court of Judicature. McBride J granted discovery only as to post-novation trading relationships and refused broader discovery. The Defendant appeals that decision, challenging the scope of relevance and the adequacy of its supporting affidavits.

Summary of the Judgment

The Court of Appeal (McCloskey LJ, Horner LJ, Huddleston J) dismissed the appeal and affirmed McBride J’s order. Applying the well-established principle that appellate interference with discretionary interlocutory orders requires an error of law, disregard of principle or unjust exercise of discretion (Evans v Bartlam; Young v Thomas; Crowther v Elgood; G v G), the court found no such error. It held:

The Defendant’s reliance on informal or post-2009 contractual variations to discharge its guarantee obligation was a question of law for contract interpretation; document discovery on that issue was not warranted.
No remoteness‐of‐damage plea was raised in the Defence, and even if it had been, no viable submissions justified extended discovery on foreseeability of loss.
The Defendant failed to establish a prima facie case under Order 24, Rule 7 that the extensive overseas and pre-2020 documents sought related to any matter in question.
The affidavits supporting the discovery application lacked the necessary specific averments of knowledge, sources, or grounds to justify Rule 7 disclosure.

Analysis

1. Precedents Cited

The Court of Appeal grounded its approach in four key strands of authority:

Discretionary Interlocutory Appeals – Evans v Bartlam [1939] A.C. 473; Young v Thomas [1892] 2 Ch 134; Crowther v Elgood (1887) 34 Ch. D. 691; G v G [1985] 1 WLR 647. These establish that an appellate court interferes only if the lower court misunderstood the law or principle.
Discovery under Order 24 Rule 7 – Herman v Yorkshire TV [1992] NI 27; Kennedy v Chief Constable [2010] NIQB 57; HL (A Minor) v Facebook [2014] NIQB 101. These require the moving party to show documents are in the opponent’s power and relate to “some matter in question” in the proceedings.
Remoteness of Damage – Hadley v Baxendale [1854] 9 Ex 341; Victoria Laundry v Newman Industries [1949] 2 KB 528; The Heron II [1969] 1 AC 350; Transfield Shipping Inc v Mercator Shipping [2008] UKHL 48; Armstead v Royal & Sun Alliance [2024] UKSC 6. These define the first and second limbs of foreseeability.
Pleadings Clarity – Order 18 Rule 15A. This demands that a Defence plainly state the defendant’s case so that the plaintiff is on notice of issues being pleaded, including any remoteness defence.

2. Legal Reasoning

The court’s reasoning unfolded in two stages:

Contract Interpretation Is a Question of Law:
McBride J’s finding that all relevant variations to the procurement contract and guarantee lie within the written instruments meant that parole evidence and pre-2020 discovery were irrelevant. The Court of Appeal agreed that interpretation of the Deed of Novation and the 2020 Guarantee was exclusively a legal exercise.
Discovery Threshold under Rule 7 Not Met:
The Defendant failed to establish (a) that the Plaintiff possessed the broad categories of documents sought (pre-2010, informal amendments, end-customer communications), and (b) that they were relevant to any pleaded issue. The affidavits did not identify specific documents or explain how they bore directly on matters in question. They relied on “I am advised” assertions without source, contrary to Order 41 Rule 5 requirements for information-and-belief statements.

The Court reaffirmed that a Rule 7 applicant must make out a prima facie case of relevance and possession before ordering targeted discovery. Vague fishing expeditions or speculative assertions cannot satisfy this burden.

3. Impact

This decision reinforces rigorous controls over interlocutory discovery in commercial litigation, particularly where large multinational parties and long contractual histories are involved. Its principal effects will be:

Litigants must tighten their discovery applications under Rule 7 to identify specific documents, timeframes, and nexus to pleaded issues.
Appeals against discovery orders will face a high threshold: absent demonstrable legal error or unreasonable exercise of discretion, they will be dismissed.
Pleadings must accurately frame every defence, including any reliance on remoteness or informal variation, to avoid being precluded from post-pleading discovery.
Solicitors supporting affidavits must comply strictly with Order 41 Rule 5, distinguishing between knowledge and belief and specifying sources.

Complex Concepts Simplified

Order 24 Rule 7 Discovery: A procedure permitting a party to apply for discovery of specific documents from its opponent by showing they are in the opponent’s power and relate to issues in the case.
Remoteness of Damage: A contractual limitation on liability: only losses arising naturally from a breach (first limb) or those within parties’ contemplation given special knowledge (second limb) are recoverable.
Parole Evidence Rule: Courts interpret written contracts by their terms, without adducing extrinsic evidence of prior negotiations, unless the contract is ambiguous.
Prima Facie Case for Discovery: The applicant must evidence—through admissible affidavit material—that (a) the documents exist or are likely to exist in the opposing party’s control, and (b) they bear directly on contested legal or factual issues.

Conclusion

Short Brothers PLC v AAR Corp underscores the strict limits on interlocutory discovery in commercial guarantee disputes. It confirms that discovery under Order 24 Rule 7 demands a clear evidential foundation—identifying relevant documents, their whereabouts, and how they relate to pleaded matters. Appeals from discretionary interlocutory orders will succeed only on established error of law or principle. Parties must therefore craft precise pleadings and affidavits, adhere to contractual interpretation principles, and avoid speculative fishing expeditions. This judgment will guide practitioners in structuring discovery applications and defending them on appeal.