The Liberal Democrats’ deputy treasurer has lost a legal battle against his party after he failed to secure its top European parliament elections spot for London.

Dinesh Dhamija, the millionaire founder of the travel website eBookers, who is one of the party’s biggest funders, had hoped to be placed first among the prospective Lib Dem candidates for London but a members’ ballot placed him second, behind the new member Irina von Wiese.

Dhamija, who also unsuccessfully ran to be the Lib Dems’ London mayoral candidate, had argued that he was disadvantaged after the party scrapped plans to give minority ethnic and LGBT candidates and candidates with disabilities priority in selections.

Under the original plans for the London list, the No 1 slot was reserved for a BAME candidate and the second slot for a woman candidate, but the plans were binned for breaching the Equalities Act.

MEPs are elected using a regional list system, where political parties propose candidates in a ranking order and are allocated seats in proportion to their share of the votes.

Dhamija lost his case at the high court on Wednesday and is understood to have accepted second place on the list.

In a joint statement with the Lib Dem president, Sal Brinton, Dhamija said: “We set out to have a really ambitious programme of diversity measures for the upcoming EU elections. However, we were forced to abandon them as the law is not robust enough.”

A party source said: “We understand Dinesh’s frustration that the goalposts were moved. We hope we can change the law so they won’t be moved again.”

One staff member at the party said there had been internal anger at the furore. “The party was not prepared to take him on,” they said.

In practice, the rules for electing MEPs mean candidates from smaller parties have a low chance of being elected unless they are ranked first on the list, though a Lib Dem source said the party hoped it could gain two seats in London.

The party currently has just one MEP, Catherine Bearder, who represents the South East region.

Dhamija, who has been a business spokesman for the People’s Vote campaign, describes himself on his election material as a “committed European”.

The Lib Dems are braced to come under pressure from the new breakaway party Change UK, run by the Independent Group of 11 Labour and Tory defector MPs. The Lib Dems had suggested an electoral alliance with the party, which also supports a second referendum, but relations have soured after a leaked memo suggested Change UK hoped to win support by cannibalising the Lib Dem base.

The document, which was leaked to the Daily Mail, said the party needed to “win over LD activists and members” and “attract support and resources from LD backers”, suggesting it was a priority to gain more defecting MPs so that the party could exceed the Lib Dems’ 12 MPs in parliament.

Change UK also set itself the target of meeting at least six “key Lib Dem backers” by May and to grow its supporter list and increase its Twitter followers to have higher numbers than the Lib Dems.

The leak prompted a furious response from senior Lib Dem politicians. The former cabinet minister Ed Davey tweeted: “Given their aggressive anti-LD plans, failure to say what they stand for and their blatant refusal to co-operate on Euro elections, time Lib Dems got realistic about [Change UK].”

A Lib Dem source said: “Remain voters do not want to see this sort of petty business.”