The Canada Revenue Agency is appealing a groundbreaking B.C. Supreme Court ruling awarding a B.C. couple $1.7 million in damages for malicious prosecution.

In documents filed this week, the CRA claims Justice Robert Punnett erred last month when he issued a blistering 70-page decision calling the tax agency "egregious" and "highly reprehensible" in its pursuit of Tony and Helen Samaroo, who live in Nanaimo.

"The trial judge made a palpable and overriding error of fact in finding that the CRA investigator suppressed or withheld evidence from the Crown, and that he was motivated by malice," the notice of appeal reads.

'Unfortunate culture within the CRA'

The appeal marks another chapter in a 12-year ordeal that began with a tip in 2006.

The CRA charged the Samaroos with 21 counts of tax evasion in 2008, accusing them of skimming $1.7 million from their restaurant.

A provincial court judge acquitted the couple after a 19-day trial in 2011, but the CRA is still battling them in tax court.

Punnett found the agency had misstated and suppressed evidence in its zeal to prosecute the Samaroos.

The lawyer for Tony and Helen Samaroo once called on Minister of National Revenue Diane Lebouthillier to apologize to his clients. (Chris Wattie/Reuters)

He faulted an investigator for putting forward a final report for charge approval without carrying out investigatory steps requested by the Crown.

The judge also said the case exposed "an unfortunate culture within the CRA" where employees joked about the ruination and possible incarceration of the plaintiffs.

The damages included nearly $348,000 in legal fees as well as $600,000 in aggravated damages and $750,000 in punitive damages against the CRA.

In the notice of appeal, the CRA claims the judge interpreted the law the wrong way with regards to the material facts of the case and whether or not they led to reasonable cause for prosecution.

The agency also says the judge was wrong in finding the Crown had to prove the "actual mechanics of fraud" in order to establish that tax evasion had taken place.

And the CRA faults Punnett for awarding legal costs for the defence of the provincial court trial to the Samaroos because their corporations were on trial — and they weren't named in the Supreme Court action.

No apology forthcoming

The lawyer for the Samaroos, Steven Kelliher, would not comment on the appeal

Following the initial ruling, he spoke out forcefully against the CRA and called on the minister of national revenue to issue an apology to his clients. That seems unlikely at this point.

The Samaroos have always denied wrongdoing.

As an immigrant from Trinidad, Tony Samaroo claimed he didn't trust banks and kept decades' worth of savings in safety deposit boxes instead.

But he said he moved the money into his bank account out of fear modern financial institutions would no longer accept his old bills.

The provincial court judge who heard the initial case found Samaroo credible.