The plaintiffs are building contractors and the defendants are building owners. On 2 March 1983, they entered into a contract whereby the plaintiffs undertook the construction and completion of a condominium development comprising town houses on lots 61–2 and 61–1 of town subdivision 28 situate at Gilstead Road, Singapore. Subsequently, the parties executed a formal agreement in writing dated 23 June 1983 ('the contract') which is in the standard form of the Singapore Institute of Architects. Forming part of and attached to the formal agreement are, inter alia, the conditions of contract ('conditions of contract').

Under the contract the date of completion of the development was 14 May 1984. As it often happens in the construction industry, the development was not completed within the time as agreed, and on 18 February 1985, the plaintiffs pursuant to cl 23(1) of the conditions of contract applied to the architects in charge of the development ('the architects') for an extension of time to 15 April 1985 for completing the then outstanding works. This was not acceded to and on 6 March 1985, the architects gave to the plaintiffs 'final extensions to the contract' as follows: (a) to 31 December 1984 for completing the main building works, and (b) to 18 February 1985 for completing the swimming pool and external works.

On 1 July 1985, the architects issued the certificate of practical completion stating that the works were, in their opinion, practically completed to their satisfaction in accordance with the conditions of contract on 1 July 1985 and possession was taken on 2 July 1985, and further that the defects liability period would end on 1 July 1986.

Under cl 31(1) of the conditions of contract read with the appendix thereto, the architects had to issue monthly interim certificates for payment to the plaintiffs, and the plaintiffs were entitled to be paid within a period of 21 days of the receipt thereof by the defendants. The architects had issued altogether 28 interim certificates, serially numbered 1 to 28, since the commencement of the works up to January 1987, and the defendants had paid the first 16 interim certificates leaving the remaining 12 certificates, namely, nos 17 to 28, unpaid. Ten of these certificates, nos 17 to 26, were issued during the period between 19 September 1984 and 27 September 1985; certificate no 27 was issued on 15 December 1986 and certificate no 28, expressed as 'pre-final certificate', was issued on 16 January 1987. The total amount due under these 12 certificates was $1,931,294.32; but a sum of $146,000 was paid to account, leaving the balance of $1,785,294.32. Between June and July 1987 a series of meetings were held between the plaintiffs' and the defendants' representatives with a view to resolving the settlement of the outstanding sum owing by the defendants to the plaintiffs under the contract. Unfortunately, these were not successful, and no further payment was made. On 9 September 1987 the plaintiffs instituted these proceedings against the defendants claiming the sum of $1,785,294.32 and interest thereon.

After the writ had been served on the defendants, they took out an application for a stay of all further proceedings under s 7 of the Arbitration Act (Cap 10) on the ground that the plaintiffs and the defendants have, by cl 37(1) of the conditions of contract, agreed to refer to arbitration the matters in respect of which the action was commenced. At or about the same time, the plaintiffs took out an application under O 14 for summary judgment against the defendants for the amount claimed. While both applications were pending, the defendants on 24 November 1987 wrote to the architects expressing doubts as to whether the latter had taken the following matters into account in issuing their certificates, namely:

(a) as regards interim payment certificates the fact that not all work included in those certificates had been carried out (see cl 31(2)(a));

(b) as regards extension o