UPDATE 1-Melnyk used private info in bid to stop meeting-Biovail

(Adds comments from Melnyk lawyer and background)

TORONTO, July 8 (Reuters) - Biovail Corp's (BVF.TO) (BVF.N) lawyers said in court on Tuesday that founder Eugene Melnyk used confidential information provided under a prearranged protocol agreement to try to "scuttle" its annual meeting.

Melnyk, who served at the company in various positions for 20 years including chairman, took the Canadian drugmaker to court, arguing the meeting was improperly held because it lacked a quorum.

The millionaire owner of the Ottawa Senators hockey team had pulled his own block of about 18.8 million shares, apparently to stop the June 25 meeting.

The company said Melnyk was playing for more time to build support for an independent slate of directors in a challenge to management.

But just minutes before the meeting began, the company instead changed its obligatory 51 percent shareholder representation requirement to 25 percent, allowing the balloting to proceed.

With Melnyk's votes pulled out, Biovail claimed an "overwhelmingly mandate" with some 97.6 percent voting in favor of the management slate.

The company's lawyer, Joel Richler, said on Tuesday an agreement struck in advance by the two sides set out various conditions including the appointment of an independent chairman for the meeting, advance release of the vote results, and an agreement to attend the meeting and comply with the vote.

Richler claimed the information Melnyk had received allowed him to pull his votes -- knocking the required shareholder representation under the required amount.

"By taking advantage of the protocol, Mr. Melnyk in effect picked up his marbles and walked away from the game with the intent of prolonging the game," Richler told the court.

"It was by taking advantage that they could scuttle the meeting."

Although the June 25 meeting proceeded, Melnyk immediately claimed that it was not properly constituted and asked that the results of the battle be thrown out and another meeting be called.

But Richler, citing other companies' quorum requirements, said Biovail's newly implemented quorum rule was "hardly atypical."

"The act of amending the bylaw was not oppressive given that 25 percent was not unreasonable or burdensome," Richler said.

However, Peter Howard, the lawyer representing Melnyk said that the board's move to amend the by-law to reduce the quorum "was an invalid and illegal attempt to change the rules of the game mid-stream."

Representatives for Melnyk claim that he was entitled to revoke his personal proxy under the negotiated protocol and that the information received was from the company under the negotiated protocol.

"The actions of the board were a "jerry-rigged" solution that did not work as a matter of law and ought not to be permitted as a matter of policy," Howard said.

"The result of ignoring the lack of quorum was that only a little more than one-third of Biovail's shareholders have voted to approve their plan."

Justice Herman Wilton-Siegel of the Ontario Superior Court reserved his decision on Tuesday and said he would make a decision by next Monday.

($1=$1.02 Canadian) (Reporting by Scott Anderson; editing by Carol Bishopric)