Late on Thursday night, Wild Oats XI was leading a tightly bunched pack of yachts in the Sydney to Hobart yacht race.

Just five nautical miles separated the first seven yachts.

Also among the pacesetters were rival supermaxis Perpetual Loyal, Ragamuffin 100 and Wild Thing, new 80-foot boat Beau Geste and the Volvo 70s, Black Jack and Giacomo.

The race had barely begun its run south earlier on Thursday before the dreaded prospect of the race being decided by the judiciary emerged, when line honours contender Perpetual Loyal raised its red protest flag for an incident after the start.

That black cloud hovered for 3½ hours, when, as the crews settled for their first night at sea, Perpetual Loyal called in on Skype to say they would not be continuing with their protest.

"Just had team meeting; decided not to proceed with protest,'' Perpetual Loyal's owner and skipper, Anthony Bell, announced at 4.21pm. ''At first we thought we may have been fouled - but … "

Then, at 4.43pm, Bell called to say: "Pretty light winds (11- 12 knots) so doing our best to keep boat going as fast as we can in non-ideal conditions.''

With that, we at last had some calm after a dramatic day that saw the sun set with defending line honours champions Wild Oats XI in first place - albeit well behind her race record time of last year.

After a thrilling start to the race under warm sun and crisp blue skies and in an east to south-easterly 12 to 15-knot wind, Wild Oats XI led the fleet out of the Sydney Heads and soon put a reef in her mainsail. Trailing behind them was Perpetual Loyal, Black Jack, Giacomo, Ragamuffin and Wild Thing.

But by then controversy and drama was already starting to unfold.

Apart from Perpetual Loyal having hoisted its protest flag soon after the first mark where she lost vital distance on the approach in a tight duel with Wild Oats XI - only to cross in behind Wild Oats XI and Beau Geste - the popular 80-foot 1997 line honours winner Brindabella was forced to return and re-round the start mark after breaking the line early.

Meanwhile, the size of the initial 94-strong fleet started to decrease. The Welbourn 50 entrant, Audi Sunshine Coast, was the first to pull out due to damaged rigging.

Then soon after, Adrian Dunphy's Andrews 52, Dodo, followed suit with a ripped mainsail and was heading back to the cruising Yacht Club of Australia at Rushcutters Bay in Sydney.