Section 138

Under an agreement between the appellant (CIBC) and Aeroplan, as the successor to Air Canada (“AC”) (the “Agreement”), Aeroplan agreed to provide CIBC credit card holders with membership in the Aeroplan Mile program and credit Aeroplan Miles to such members, with the result that the Cardholder would generally earn one Aeroplan Mile for each dollar of purchases charged to the Cardholder's Visa AeroCard account. Aeroplan would then invoice CIBC for the Aeroplan Miles credited to the Cardholder. The Cardholder would subsequently redeem the Miles in exchange for the acquisition of property or services chosen from a menu. The Agreement provided that the fees of AC were payable by CIBC “in consideration of AC referring or arranging for Aeroplan members and other members of the public to make Card Applications and in consideration of AC performing its other obligations herein which are incidental to the foregoing.”

After finding that Aeroplan made a single supply under the Agreement, Visser J stated (at para. 30):

[T]he individual elements of the Aeroplan Supplies are highly interconnected and each forms an integral part or component of the overall supply of the Aeroplan Mile Program by Aeroplan to CIBC. …[T] here is no evidence that CIBC would have been prepared to pay consideration to Aeroplan for any of the separate elements on their own, and Aeroplan issued invoices to CIBC in respect of its “participation in the Aeroplan Program” for each of CIBC’s credit cards, generally computed with reference to the number of Aeroplan Miles issued during the relevant billing period.

He went on to state (at para. 35):

…In the alternative, if the supply of the Aeroplan Supplies included multiple supplies, one of which was the separate supply of Aeroplan Miles, … the supply of the Aeroplan Miles was incidental to the supply of promotional and marketing services by Aeroplan to CIBC, such that the supply of the Aeroplan Miles is deemed by section 138 of the Act to be a part of the supply of the promotional and marketing services made by Aeroplan to CIBC.

The appellant, which was a for-profit operator of a B.C. residential care home, was invoiced periodically, based on an flat hourly rate, by a third-party independent contractor ("HARPS") for the services of its "care aides" (who performed personal services and provided assistance to residents with the activities of daily living), and "activity aides" (who focused on social activities for the residents and whose time represented 5.4% of the total).

After finding that the provision of the services of the care aides qualified as an exempt "homemaker service" under Sched. V, Pt. II, s. 13, Paris J found that s. 138 did not deem the activity aide services to form part of a single supply of care aide services. He stated (at paras. 75-6):

[T]he method of invoicing the activity aide and care aide supplies does not result in those services being provided for a single consideration. …[T]he total hours and fees for both types of aides were combined on the invoices because the hourly rate for all of those aides was the same. Therefore, the consideration for each category of worker would be determinable and separate amounts.

…[T]he activity aide services were not incidental to the care aide services. …[E]ach kind of service was independent of the other and had value as a separate supply.

See summaries under Sched. V, Pt. II, s. 13 and Sched. V, Pt. II, s. 1 – home care services.

The appellant ("Global") enabled casino patrons to use their credit cards to purchase cheques from Global which they could negotiate for cash. To this end, the patron first used his or her credit card at a kiosk on the casino premises (or at a cashier cage) to get the cheque-purchase transaction approved by the credit card issuer. The casino cashier then issued, on Global's behalf, a cheque made out by Global to the casino operator, which the casino operator then negotiated for cash provided to the patron. At issue was the taxability of fees paid by Global to the casino operator.

Woods J found that the activities of the casino operator in allowing kiosks on its premises and providing support services at the cashier cages, were excluded from the definition of (exempt) "financial services" in s. 123(1) under paras. (r.4) and (r.5) of that definition, whereas the casino operator's role of cashing the cheques was a financial service described in paras. (a) and (d) of the definition.

She then found that the above elements (kiosk provision, cashier services and cheque cashing) were "not so interdependent that they should be considered a single supply," it being "convenient, but not necessary, that the Casinos provide all of these elements" (para. 94), and "none of these elements are a minor part of the supply so as to be incidental" for purposes of s. 138 (para. 96). It was appropriate to allocate 25% of the fees paid to the casino operator as consideration for the exempt cheque-cashing service, and to treat the balance as taxable.

The appellant ("CTM") sold mortgage loans made by it to arm's length securitization trusts and serviced the sold mortgages including collecting and accounting for payments, and dealing with renewals and defaults. The consideration for a sale for the most part comprised a "Closing Payment" paid by the purchaser trust out of the proceeds of commercial paper issuances and "Deferred Amounts" representing most of the cash subsequently generated to the trust from the purchased mortgages net of all other outlays. CTM did not explicitly charge the trusts for the servicing, but recorded fees for such services in its financial statements.

After finding that there was a single supply of a financial service by CTM, Bowman ACJ went on to find that if this were not the case, s. 138 or 139 would have applied to deem this result to have occurred, stating (at para. 25) that the above-summarized provisions of the sale agreement "establish conclusively that the consideration for the sale of the mortgages and the servicing of the mortgages was a single consideration." Respecting the reporting of an imputed servicing fee of 25 basis points per annum in CTM's financial statements, he stated (at para. 28) that "there is… no basis for the respondent to assume that a note in the financial statements of a party to a transaction who is not even the person primarily liable for the GST can override the intentions of both parties as evidenced in the agreement between them."

After finding that the U.S. head office of the appellant (an auto insurer) did not render or supply services to the Canadian regional office, Bowman A.C.J. went on to find that if such services were rendered, they were financial services. He noted that the respondent's argument "would essentially restrict financial services, in the context of the insurance business, to the issuance of an insurance policy to an insured" and that the concept of underwriting was much broader than this.

The sale and installation of a van conversion package for wheelchair access (which included lowering the van floor, installing a wheelchair ramp, installing a power door, installing tie-downs for the wheelchair, and modifying the van's seats) was found to constitute the supply of a "particular property" for purposes of s. 138, rather than of a number of properties.

In finding that all of the consideration received by the taxpayer company for supplies of biscuits packed in tins was zero-rated, Lord Murray concluded (at p. 5050) that the supply of the tin was both "incidental" to the supply of biscuits (given that it was not "so elaborate, expensive or decorative as to qualify as a container in its own right") and was "integral" to the supply of biscuits both because it was the container in which the biscuits were in fact packaged, but further in the sense that the tin facilitated the supply of the biscuits to a restricted, quality market as well as prolonging their shelf-life and keeping the biscuits in better condition once consumption of the biscuits had begun.

In finding that British Airways was providing a single supply of air transportation to its customers, rather than two supplies, namely, air transportation and catering services, Parker L.J. stated (p. 5129):

"In-flight catering is in my judgment as much part of the supply of transport as the many other things which British Airways provide for the comfort and convenience of their passengers such as sweets before take-off and landing, blankets, extra cushions, magazines and newspapers, and so on."