July 16 (Bloomberg) -- Biovail Corp. founder Eugene Melnyk won a court victory that overturns last month's board of directors election for Canada's largest drugmaker and gives him another chance to seat his candidates.

The Ontario Superior Court of Justice ruled today that Biovail's June 25 annual meeting didn't have enough shareholders for a legal vote on a new board. The company said it will reschedule another vote within weeks, setting up a rematch over the drugmaker's future.

Melnyk, 49, owner of the Ottawa Senators hockey team and almost 12 percent of Biovail shares, is seeking to regain control of the company, maker of the antidepressant Wellbutrin XL. He withdrew his proxies at the annual meeting, leaving the company short of the 51 percent of shares needed for a quorum. The company board changed its bylaws and held the shareholder vote anyway, claiming victory by a slate of directors led by Chairman Douglas Squires.

``Today's court ruling means all shareholders will have an opportunity to further evaluate the two very different visions for the future of Biovail,'' said Bruce Brydon, Biovail's former chief executive officer and Melnyk's choice to lead the company, in a statement.

Nelson Isabel, Biovail's vice president for investor relations, said that while the ruling will bring ``delay and inconvenience and expense,'' the company ``remains confident that the management slate will be elected'' when shareholders vote again.

New Voting

Biovail, based in Mississauga, Ontario, hopes to reconvene the meeting within weeks, Isabel said. Shareholders who submitted proxies at the June meeting and want their vote to remain the same don't need to do anything further, Isabel said.

``All submitted proxies remain valid,'' he said.

The company's board nominees won 62 million votes in a preliminary count, according to today's ruling. Melnyk's slate won 36 million votes.

Biovail argued at a July 8 court hearing that Melnyk broke an agreement to vote his shares at the meeting in exchange for getting preliminary results of the election a day early.

``I do not think that the guidelines obligated the Melnyk parties to vote their shares,'' Ontario Superior Court Judge Herman Wilton-Siegel said in his 16-page ruling.

``The guidelines were negotiated in the midst of a fierce proxy contest'' and didn't clearly state Melnyk's obligations. Winston-Siegel said Biovail failed to show annulment of the vote would cause it ``significant economic prejudice.''

Months of Campaigning

Biovail gained 2 centsto $9.87 at 3 p.m. in New York Stock Exchange composite trading. The company has lost more than half its value since Melnyk resigned in June 2007. Melnyk still faces U.S. securities charges accusing him of fraud in connection with his leadership of Biovail.

During months of campaigning, the company and Melnyk touted competing strategies to combat flagging sales of Biovail's two biggest-selling drugs, Wellbutrin XL and blood-pressure medicine Cardizem LA. Melnyk said he'll start a competing drug company if he doesn't regain control of Biovail.

To contact the reporters on this story: Rob Waters in San Francisco at rwaters5@bloomberg.net; Joe Schneider in Toronto at jschneider5@bloomberg.net.

Last Updated: July 16, 2008 15:04 EDT