Manly are facing the prospect of a $2.8 million sponsorship black hole after losing their initial court case with major backer Coco Joy.

The Sea Eagles were of the belief they had entered into a binding $3.6 million contract with the coconut water brand and were seeking the winding up of the company if it failed to pay the $302,500 it claimed was due and payable on February 20. However, the statutory demand served on parent company FAL Healthy Beverages was set aside in the Supreme Court on Wednesday, with the Sea Eagles ordered to pay FAL's costs.

Sponsorship stoush: The Sea Eagles and Coco Joy are at loggerheads. Credit:Matt Roberts

"We welcome the court's decision and are pleased this matter has now concluded," said a spokesperson for FAL Healthy Beverages.

It's understood that FAL has only paid about $400,000 of sponsorship monies, plus GST, thus far and that ruling will effectively preclude the Sea Eagles from chasing the $550,000 said to be outstanding for the remainder of the 2016 season, as the ruling sets a precedent for the claiming of future instalment claims.