MONTREAL • On a Sunday morning two years ago, Paula Celani and about 80 members of her Catholic lay group gathered in a hall they had rented from the city. They watched an inspirational video, they prayed, they celebrated mass and they capped it off with a potluck lunch. “We had a beautiful day,” Ms. Celani recalls.

But now that beautiful day has generated a nasty court battle after she was hit with a $144 ticket from the city, which alleged her event was illegal because it involved religious worship.

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