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A Canadian couple should not have had their foster children taken away after they refused to lie and say that the Easter Bunny was real, a judge ruled.

Frances and Derek Baars, a religious Christian couple, said they would host an Easter egg hunt, but that was not enough to satisfy their case worker.

The agency removed the children, aged three and five, closed their foster home, and barred future adoptions.

The couple sued the Children's Aid Society (CAS) as a result.

The CAS, which receives taxpayer funding, provides child protection services on behalf of the province.

The non-governmental organisation has frequently been criticised, and some - including those featured in 2011 documentary "Powerful As God" - have argued it wields too much power.

Justice Andrew Goodman wrote in a scathing decision released on Tuesday: "There is ample evidence to support the fact that the children were removed because the Baars refused to either tell or imply that the Easter Bunny was delivering chocolate to the Baars' home.

"I am more than satisfied that the society actions interfered substantially with the Baars' religious beliefs."

As devout Reformed Presbyterians, Derek and Frances Baars said they did not believe in celebrating Halloween or lying about Santa Claus or the Easter Bunny.

CAS support worker Tracey Lindsay acknowledged that the girls were well cared for, CTV News reported.

The CAS contended Ms Lindsay "never asked (the Baars) to lie or betray their faith".

But the Baars argue she told them it was their duty as foster parents to teach the children about the Easter Bunny, according to court documents.

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For Easter, the couple told their case worker that they would buy the girls Easter dresses and hide chocolate eggs around the house. Their one sticking point was that they would not say the Easter Bunny was real.

In late February 2016, the couple said their case worker told them that the girls would be taken away and their foster home permanently closed if the Baars refused to proactively confirm that the Easter Bunny existed.

As a compromise, the couple said the girls could celebrate Easter with another foster family. But the girls were instead taken away and the couple were barred from becoming foster parents in the future.

Justice Goodman found the couple celebrated Christmas with the girls, bought them presents and and shared photos of the holiday with their mum.

The couple's record has now been cleared and they are allowed to become foster parents or adopt in the future.

"We are very thankful for it, that we've been vindicated. Our names have been cleared and we don't have that hanging over us anymore," Mrs Baars told the National Post.

Dominic Verticchio, executive director of the Hamilton CAS, apologised to the couple through the newspaper.

"We recognise what our mistakes were," he said. "We respect the decision of the court… and we have to ensure it doesn't happen again."