A failed asylum-seeker who left a 12-year-old girl to die in a road traffic accident has won the right to remain in this country, an outcome that has outraged her family and stunned officials from the UK Border Agency.

Aso Mohammed Ibrahim, 32, had already been banned from driving and was facing deportation when he left Amy Houston dying under the wheels after colliding with her in his black Rover car. The Kurdish Iraqi, who has since committed further driving offences, was told by a judge in Manchester that he could stay in Britain because, in the six years since the tragedy, he had put down roots, married a British woman and now had two daughters.

Jack Straw, the Justice Secretary and the MP for the dead girl’s family, said he was so alarmed by the court’s decision that he intended to press Alan Johnson, the Home Secretary, for an urgent review.

Paul Houston, 39, Amy’s father, has been campaigning for the Iraqi to be deported since his daughter’s death in November 2003. “My daughter would be alive today if Ibrahim, a banned driver, had not flouted the law and got into the car that day. If he is not prepared to live by our laws, then he does not deserve to stay here. It is not a question of race. It is a question of right and wrong,” he said. “I cannot believe the judge’s decision that he thinks it is right for him to stay here. They may as well give out passports in lucky bags because that is all they are worth. “It was very difficult for me to go to the hearing and stand ten feet away from the man who killed my daughter. The court’s decision is the best Christmas present he could wish for, and a terrible one for my family. Where is the justice?”

Mr Ibrahim, who has never held a valid driving licence, had been banned for nine months for driving while disqualified, without insurance or a licence, and was on bail at the time of the collision.

Amy was on her way to a record shop to buy the new CD of her favourite group, Busted, when she stepped into the road near her home in Blackburn and into the car’s path. She was trapped under the vehicle and had to be freed by firefighters. A police officer drove the ambulance to hospital to allow paramedics to treat the child but she died later that day.

While the rescue operation was under way Mr Ibrahim panicked and fled from the scene. He later confessed to a friend what he had done and gave himself up to police. He served two months of a four-month jail term. In 2006 he was convicted on a fresh charge of driving while disqualified, the latest in a series of motoring offences. The UK Border Agency had been anxious to deport Mr Ibrahim at the earliest opportunity, even taking him into the care of a deportation centre.

He launched his latest appeal under human rights legislation, suggesting that deporting him would breach his right to “respect for family life”.

Mr Ibrahim, speaking at an earlier appeals hearing, said: “This incident when Amy died was an accident and should not stop me living in this country with my family. “I did not expect to meet Christina [his partner] or have children when I came here seven years ago but it has happened and I cannot leave them. I cannot go back to Iraq. Do you not watch the news? It is far too dangerous.”

Mr Straw said that he would be writing to the Home Secretary “to see if there is any way we can appeal against this decision … I will also be talking to the family. They have been through an awful ordeal.”

The UK Border Agency is assessing the implications of the case for asylum-seekers deemed to be a danger to the public. Jo Liddy, the agency’s regional director, said: “We are extremely disappointed at the court’s decision to allow Mr Ibrahim’s appeal against removal from the UK. We have made it clear that we will prioritise the removal of those foreign nationals who present the most risk of harm to the public.

“Last year we removed a record 5,400 foreign nationals, including over 50 killers and attempted killers, over 200 sex offenders and more than 1,500 drug offenders. In total more than 66,000 people were removed or returned home voluntarily.”