July 8 (Bloomberg) -- Biovail Corp., Canada's biggest publicly traded drugmaker, will learn by July 14 whether last month's board election was legal, an Ontario judge said in response to a request by founder Eugene Melnyk to annul the vote.

Ontario Superior Court Judge Herman Wilton-Siegel said today following a hearing in Toronto that he would rule ``at the latest next Monday.'' Melnyk, who owns 11.7 percent of the shares, is seeking to regain control of Biovail.

He withdrew his proxies at Biovail's June 25 annual meeting, leaving the company short of the 51 percent needed for a quorum. The board changed the bylaw to 25 percent and the vote went ahead, with 98 percent of those casting ballots favoring a company slate led by Chairman Douglas Squires.

Melnyk, 49, asked Wilton-Siegel to annul the vote and reschedule the meeting, saying the bylaw change was illegal. Joel Richler, Biovail's lawyer, said at today's hearing that the election was legal and Melnyk got preliminary results a day before the meeting in exchange for a promise to attend and vote.

``Mr. Melnyk is not entitled to revoke his proxies,'' Richler said. ``Mr. Melnyk's behavior itself was wrongful.''

Melnyk's lawyer, Peter Howard, said in an e-mailed statement that the decision to change the rules in a 10-minute, closed-door meeting was ``a jerry-rigged solution'' that didn't work. ``The result of ignoring the lack of quorum'' was that the board plan was approved with support from only about one-third of Biovail shareholders, he said.

The board was obligated to put the rule change to a shareholder vote and failed to do so, invalidating it, Howard said earlier in court.

U.S. Allegations

Biovail, based in Mississauga, Ontario, has lost more than half its value on the New York Stock Exchange since Melnyk resigned in June 2007 amid U.S. allegations of securities fraud and improper marketing. During months of campaigning, the company and Melnyk touted competing strategies to combat flagging sales of Biovail's two biggest-selling drugs, the antidepressant Wellbutrin XL and blood-pressure medicine Cardizem LA.

Melnyk said he will start a new company with $50 million to $100 million of his own money if he loses in court and Biovail's new directors are seated.

William Wells, the former supermarket executive who took over as chief executive officer May 1, said Biovail will shut its Puerto Rico plants and fire 250 workers as part of a plan to develop drugs for central nervous-system disorders, including Parkinson's disease and multiple sclerosis.

Melnyk has called the plan ``absolute pharmaceutical suicide.'' The Puerto Rico plants are critical for manufacturing capacity and the market for central nervous-system drugs is too crowded to be profitable, he said in an interview June 2.

Generic Drugs

Melnyk's 10 director candidates instead recommended investing in generic drugs, reformulating existing products and developing genetically-engineered biotechnology drugs, according to his slate's proxy filing.

In March, Melnyk and three other executives were accused by U.S. regulators of fraud, partly for blaming a missed earnings forecast in 2003 on a fatal accident involving a truck hauling Wellbutrin. After Melnyk's departure last year, Biovail also settled a criminal probe and investor class-action lawsuit over Cardizem marketing.

The case is Between Eugene Melnyk and Biovail Corp. 08-cv-7627. Ontario Superior Court of Justice (Toronto).

To contact the reporter on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net.

Last Updated: July 8, 2008 18:17 EDT