Collège LaSalle: Quebec gets leave to appeal the full-allocation order

The budgetary regime that Quebec's Ministère de l'Enseignement supérieur issued in June 2026 for the province's subsidized private colleges pays each year's allocations in monthly instalments, at a rhythm it sets out: 2% in July, 8% in August, 5% in each of September and October, 10% in each of November and December, 5% in each of January, February and March, and 15% in each of April, May and June. Two paragraphs later it reserves a power. "Si, en cours d'année scolaire, des données préliminaires laissent présager une forte baisse de clientèle dans un établissement, le Ministère peut limiter ou interrompre les versements" [translation: "If, during the school year, preliminary data point to a sharp drop in enrolment at an institution, the Ministry may limit or interrupt the payments"], per the Application for Leave to Appeal, Sept. 23, 2026, Annex 4 (Exhibit PGQ-1, 2026-2027 budgetary regime), paras. 45–46, 48, p. 58. The Attorney General of Quebec, acting for the ministry, quotes that paragraph in full in its application for leave to appeal. To avoid an overpayment to Collège LaSalle, the application says, the ministry had indicated that it would consider using the power once it had the college's attendance data for November 2026; the order Justice Martin Castonguay of the Superior Court made on September 3, it says, sets that possibility aside, per the Application for Leave to Appeal, Sept. 23, 2026, paras. 6, 9, 12–13.

On October 6, Justice Alexandre Boucher of the Quebec Court of Appeal granted leave. The proposed appeal, he wrote, "soulève des questions d'intérêt général importantes pour le présent litige, portant notamment sur l'étendue des pouvoirs du juge chargé de l'application de la L.a.c.c. à l'égard de l'exercice par l'État de ses prérogatives en matière de gestion et d'affectation des fonds publics" [translation: "raises questions of general interest that are important to the present litigation, concerning in particular the extent of the powers of the judge charged with applying the CCAA with respect to the State's exercise of its prerogatives in the management and allocation of public funds"], per the Judgment on the Application for Leave to Appeal, Oct. 6, 2026, para. 3.

The order under appeal declares the college entitled to the full amount of the subsidies under its 2026-2027 initial allocation, without withholding, deduction or set-off by the Government of Quebec, and orders the government to pay them, per the Amended and Restated Initial Order, Sept. 3, 2026, paras. 4–5. It was reported here on September 4, with the monitor's reservation about it. The Attorney General's notice that it would seek leave was reported here on September 24.

Four errors, by Quebec's count

The application, dated September 23, puts the value in dispute at $16,000,000 and says the order was made at a one-day hearing on September 3, per the Application for Leave to Appeal, Sept. 23, 2026, paras. 2–5. The two-page order itself states no reasons, per the Amended and Restated Initial Order, Sept. 3, 2026. According to the application, Justice Castonguay gave them briefly and orally: the students' return to school and the preservation of jobs justified the order, and he also noted that the ministry had never used the discretionary power that allows it to adjust payments in the event of a sharp drop, per the Application for Leave to Appeal, Sept. 23, 2026, para. 14.

The college's initial allocation for 2026-2027 is $31.8 million, the application says. At the hearing, by its account, Benoit Clouâtre, for the monitor, indicated that if the ministry were obliged to pay the full initial allocation as the order provides, an overpayment would be created, and with it an additional debt of $16 million to $18 million, per the Application for Leave to Appeal, Sept. 23, 2026, paras. 10–11.

The first error the application alleges is the judge's failure to respect the different functions of the executive, the legislature and the judiciary, by ordering full payment and setting the executive's discretion aside at the outset when the executive had made no decision and given no reasons. The Attorney General intends to show that this runs against the Supreme Court's teaching that the three branches not exceed their limits and, relatedly, that courts defer to executive decisions through the reasonableness standard, citing Ontario v. Criminal Lawyers' Association of Ontario, 2013 SCC 43, and Vavilov, 2019 SCC 65, per the Application for Leave to Appeal, Sept. 23, 2026, paras. 15(a), 17–19. A second ground rests on Sun Indalex Finance, LLC v. United Steelworkers, 2013 SCC 6: the CCAA's discretion can legitimately be read so as not to conflict with the budgetary rules and the executive discretion they provide, and the judge, the application says, had to prefer that reading. Citing Montréal (City) v. Deloitte Restructuring Inc., 2021 SCC 53, the application also says the judge advanced some of the Act's remedial objectives while going directly against others, namely maximizing recovery for creditors and improving the credit system generally, creating by his order an additional debt of $16 million, per the Application for Leave to Appeal, Sept. 23, 2026, paras. 15(b)–(c), 20–24. Last, it faults the judge for taking into account that the power had never been used, a fact it calls of no relevance in itself, since several legitimate reasons can explain why a statutory discretion or a contractual right went unused before a CCAA filing, per the Application for Leave to Appeal, Sept. 23, 2026, paras. 15(d), 26–27.

On the test for leave, the Attorney General said courts have already been asked whether the discretion under the CCAA and the BIA lets them take the executive's place in exercising a discretion conferred by statute, and have reached different conclusions, citing Arrangement relatif à Rising Phoenix International Inc., 2022 QCCS 1670, and Tantalus Labs Ltd. (Re), 2023 BCSC 1450. The judgment, it added, raises whether a creditor can be obliged to advance funds in a way that worsens its own financial position in order to serve the CCAA's other objectives, with possible major effects on government authorities that run financial assistance programs, among other creditors, per the Application for Leave to Appeal, Sept. 23, 2026, paras. 31–33. The question matters to this case, the application says, because the debt grows each month and, without the right to adjust payments for the fall in enrolment, the additional debt will be $16 million to $18 million in June 2027. Nor, it says, would an appeal stop the college proposing a plan, or the ministry taking part in discussions on one. On the appeal itself, the Attorney General would ask the court to set aside the declaration and the payment order, paragraphs 4 and 5 of the September 3 order, with costs at both levels, per the Application for Leave to Appeal, Sept. 23, 2026, paras. 35, 37–38.

What the ministry swore on September 1

The application's account of the funding cycle cites a sworn statement dated September 1 by Dany Roy, the ministry's assistant deputy minister for financing, budget and infrastructure, made in the Superior Court file and annexed to the application. The college's 2026-2027 initial allocation of $31.8 million, he wrote, took into account, among other things, an estimated 2,000 or so full-time DEC students, excluding full-time AEC students. It appeared to him very probable that the college would have to repay part of its subsidy when the 2026-2027 allocation is revised, and, he wrote, if enrolment stays comparable to 2025-2026's, the initial allocation will exceed the final one, per the Application for Leave to Appeal, Sept. 23, 2026, Annex 3 (Sworn Statement of Dany Roy, Sept. 1, 2026), paras. 1, 37–40. In the same statement he gave his view of the college itself: "Au-delà des montants dus au gouvernement, le Collège LaSalle ne semble pas être viable financièrement" [translation: "Beyond the amounts owed to the government, Collège LaSalle does not appear to be financially viable"]. Even if the government agreed to give up its claims, he wrote, the financial documents submitted tend to show at present that the college does not operate a viable business without a serious restructuring of its activities, per the Application for Leave to Appeal, Sept. 23, 2026, Annex 3 (Sworn Statement of Dany Roy, Sept. 1, 2026), para. 48.