Depending on the dates of your trip (in particular, if your mother in law will be in Canada for the entire 90-day period preceding her arrival in the Schengen area), the consulate in Canada should process the application.
Article 6, paragraph 2 of the Schengen Visa Code reads
A consulate of the competent Member State shall examine and decide on an application lodged by a third-country national legally present but not residing in its jurisdiction, if the applicant has provided justification for lodging the application at that consulate.
The handbook for implementing the code offers some examples of acceptable justification in section 2.8. A pertinent example:
Example: A Peruvian artist is scheduled to perform in Portugal on 25.5., and from 20.2. to 15.5 she is performing in Canada and the United States. Under such circumstances a Portuguese consulate in Canada or the United States should allow the applicant to submit the application,because it would be impossible for her to apply while still in her country of residence given the rule of not applying for a visa earlier than three months before the date of the intended entry into the territory of the Member States.
One interpretation of the above example is that an application may be considered when the traveler will be away from the country of residence during the entire period during which a visa application must be submitted.
The German consulate's statement about proving that it was not possible to apply in your home country should be interpreted in this light, though it is of course possible that they will interpret the rules differently.
The best way to find out is to apply. You won't lose the application fee, because if the consulate determines that your justification is insufficient, they will follow section 2.7:
If the consulate establishes that it is not competent to deal with an application after the application has been lodged, this information shall immediately be communicated to the applicant, and the entire application (application form and supporting documents) should be returned as well as the visa fee. The applicant shall be informed of where to submit the application.