CANADIAN IMPERIAL BANK OF COMMERCE, Appellant, v. HER MAJESTY THE QUEEN,, 2019 TCC 79

Docket: 2012-1261(GST)G BETWEEN: CANADIAN IMPERIAL BANK OF COMMERCE, Appellant, and HER MAJESTY THE QUEEN, Respondent . Appeal heard on April 10 and 11, 2017, at Toronto, Ontario By: The Honourable Justice Henry A. Visser Appearances : Counsel for the Appellant: Al Meghji, Al Nawaz-Nanji, Andrew Boyd Counsel for the Respondent: Marilyn Vardy, Craig Maw JUDGMENT The Appeal made under the Excise Tax Act by Notice of Assessment dated March 25, 2011, is dismissed.

The parties shall have 30 days from the date hereof to reach an agreement on costs, failing which the Respondent shall have a further 30 days to file written submissions on costs and CIBC shall have yet a further 30 days to file a written response. Any such submissions shall not exceed 10 pages in length. If the parties do not advise the Court that they have reached an agreement and no submissions are received, costs shall be awarded to the Respondent as set out in the Tariff. Signed at Ottawa, Canada, this 16t h day of April 2019. " “Henry A. Visser” " Visser J.

Citation: 2019 TCC 79 Date: 20190416 Docket: 2012-1261(GST)G BETWEEN: CANADIAN IMPERIAL BANK OF COMMERCE, Appellant, and HER MAJESTY THE QUEEN, Respondent. REASONS FOR JUDGMENT Visser J. [ 1 ] The Canadian Imperial Bank of Commerce ( " “CIBC” " ) is seeking a rebate for GST paid in error of approximately $44.6 million in relation to payments it made to Aeroplan Limited Partnership ( " “Aeroplan” " ) under the Aeroplan Mile loyalty program (the " “Aeroplan Mile Program” " ).

Therefore, this appeal requires the determination of whether the supplies made by Aeroplan to CIBC in respect of the Aeroplan Mile Program were subject to GST during the period under appeal. For the reasons that follow, it is my view that they were subject to GST, and that as a result CIBC did not pay GST in error and is therefore not eligible to claim the rebate at issue in this Appeal. I. OVERVIEW [ 2 ] During the period from March 25, 2005 to February 26, 2007 (the " “Period” " ), CIBC was an accumulation partner of the Aeroplan Mile Program operated by Aeroplan.

Pursuant to agreements between the parties, CIBC made substantial payments (the " “Aeroplan Payments” " ) [1] in the Period to Aeroplan for its participation in the Aeroplan Mile Program. The Aeroplan Payments were substantially computed with reference to the number of Aeroplan Miles issued by Aeroplan to CIBC’s customers during the Period. Pursuant to

section 165 of

Part IX of the Excise Tax Act (the " “ Act ” " ) [2] , Aeroplan charged, and CIBC paid, goods and services tax ( " “GST” " ) [3] on the Aeroplan Payments on the basis that the supplies made by Aeroplan to CIBC during the Period (the " “Aeroplan Supplies” " ) were taxable supplies for the purposes of the Act . [ 3 ] CIBC subsequently took the position that the Aeroplan Supplies made by Aeroplan to CIBC were supplies of exempt financial services and were therefore not subject to GST under the Act . In that respect, CIBC filed a General Application for Rebate of GST/HST (Form GST189 E (06)) (the " “Rebate Form” " ) pursuant to

section 261 of the Act with the Minister of National Revenue (the " “Minister” " ) on March 26, 2007 in the amount of $44,631,063.32 for the Period on the basis that it had paid GST in error on the Aeroplan Supplies. [4] On May 13, 2009, CIBC revised the amount of the rebate claimed (the " “Rebate” " ) to $44,784,563.64 (an increase of $153,500.32) due to an alleged incorrect calculation of input tax credits which the Appellant had claimed in respect of the Aeroplan Supplies in the relevant periods. [5] On March 25, 2011, the Minister issued a Notice of Assessment (the " “Assessment” " ) pursuant to

section 297 of the Act in respect of CIBC’s rebate application, denying the rebate in full [6] on the basis that the Aeroplan Supplies were taxable supplies. [7] CIBC has appealed that Assessment to this Court. In a Notice of Motion filed by the Respondent on January 18, 2013 in this matter, the Respondent notes that the Appellant has also claimed an additional $79,838,793.63 of similar GST rebates for periods between February 27, 2007 and June 30, 2010. Those additional rebates claimed by CIBC are not directly at issue in these appeals. [8] II. ISSUES [ 4 ] CIBC’s basis for the Rebate it claimed pursuant to

section 261 of the Act shifted over time. In its letter of March 26, 2007, and the accompanying Rebate Form [9] , as well as in its correspondence of May 13, 2009, [10] CIBC took the position that the Aeroplan Supplies were exempt supplies of financial services. In its Notice of Appeal filed on March 28, 2012, CIBC initially took the position that the Aeroplan Supplies were exempt supplies of financial services, or alternatively that the Aeroplan Mile Program was a joint venture or in the further alternative that the Aeroplan Miles were gift certificates.

Prior to trial, however, CIBC amended its Notice of Appeal a number of times and abandoned some of its positions, so that at trial CIBC only raised a single issue and basis for its positon as follows: The issue in this Appeal is whether the Aeroplan Payments were consideration for Aeroplan’s issuance or sale of a “gift certificate” as contemplated by

section 181.2 of the Act . [11] [ 5 ] In essence, CIBC argues that the Aeroplan Miles issued by Aeroplan to CIBC’s customers were " “gift certificates” " , and that the Aeroplan Supplies were therefore deemed not to be a supply pursuant to

section 181.2 of the Act and were therefore not subject to GST pursuant to the Act . [ 6 ] In her Fresh as Amended Reply to Further Amended Notice of Appeal (the " “Fresh Reply” " ), the Respondent set out the following three issues at paragraph 28 thereof in relation to this Appeal:

a) Is there any element of potential double recovery of tax paid as a result of ITCs previously claimed by the [A]ppellant and allowed by the Minister for the period under appeal?

b) Did the [A]ppellant satisfy the requirements for making a valid rebate application within the limitation period?

c) Was Air Canada/Aeroplan issuing or selling “gift certificates”? [ 7 ] At trial, Counsel for the Respondent further narrowed these issues by abandoning the first issue set out above. As such, the primary issue in this Appeal is whether the Aeroplan Supplies made by Aeroplan to CIBC (and by extension the Aeroplan Payments made by CIBC to Aeroplan) during the Period under appeal were taxable supplies subject to GST, or whether they were excluded from the application of GST by being deemed not to be a supply pursuant to

section 181.2 of the Act . In this respect, the parties have characterized the issue as being whether the Aeroplan Payments were in consideration for the issuance or sale of “gift certificates” by

Aeroplan to CIBC or its customers. In the alternative, the Respondent characterized the issue as being whether the Aeroplan Payments were in consideration for the supply of a promotional and marketing service by Aeroplan to CIBC. In essence, the primary issue in this Appeal is whether the Aeroplan Supplies should be characterized for GST purposes as a taxable supply of promotional and marketing services or whether they should be characterized as a supply of “gift certificates” which are deemed by

section 181.2 not to be a supply. [ 8 ] A secondary issue in this Appeal relates to the computation of CIBC’s rebate claim and is only relevant if the Appellant is successful in respect of the primary issue. In particular, the secondary issue is whether $2,254,282.60 of GST claimed by CIBC, which was paid on February 28, 2007, being two days after the February 26, 2007, end of the rebate claim Period as set out in the Appellant’s Rebate Form, can be recovered by CIBC as a rebate in this Appeal.

In this respect, the Appellant argues that the Rebate Form contained a small, non-material, clerical error regarding the rebate period end date, and that it should be entitled to recover the $2,254,282.60 of GST paid on February 28, 2007 notwithstanding the clerical error.

The Respondent argues that the February 28, 2007 payment was made after the Period under appeal before this Court, and that therefore the Appellant cannot recover that amount pursuant to this Appeal. [ 9 ] For the reasons that follow, it is my view that the Aeroplan Supplies were taxable supplies of promotional and marketing services by Aeroplan to CIBC. In the alternative, it is also my view that the Aeroplan Miles at issue in this Appeal were not " “gift certificates” " for the purpose of

section 181.2 of the Act , and that therefore

section 181.2 did not apply to deem the Aeroplan Supplies not to be a supply for the purposes of the Act . As a result, it is my view that the Aeroplan Supplies were subject to GST for the Period and the Assessment under appeal, and that the Minister therefore properly denied CIBC’s Rebate application. Although the secondary issue is moot as a result of my determination of the primary issue, it is my view that CIBC could claim a rebate in respect of the $2,254,282.60 of GST paid on February 28, 2007 if CIBC was otherwise entitled to claim the Rebate. III.

BACKGROUND FACTS [ 10 ] The facts in this case are generally not in dispute. The parties submitted a Statement of Agreed Facts (Partial) which is set out at Appendix " “A” " . The parties also submitted a Joint Book of Documents [12] which includes, inter alia , copies of the relevant agreements governing the relationship between CIBC and Aeroplan during the Period, as well as copies of the Rebate Form and the invoices which are the subject of the Aeroplan Payments and the Rebate under Appeal. In addition, the Appellant called Stephen Webster to testify. Mr.

Webster joined CIBC in 1992 and, at the time of trial, was vice president of travel cards at CIBC. His responsibilities included management of the Aeroplan Mile Program for CIBC. Mr. Webster testified about how CIBC used Aeroplan to market financial services, and about how the relationship between the companies worked and how both companies interacted with customers. He also described how Aeroplan Miles were distributed as loyalty rewards and given away to attract and retain customers. Mr. Webster also explained that customers of CIBC’s various financial products accumulated Aeroplan Miles at different rates.

I found Mr. Webster to be a credible witness. Each of the parties also submitted discovery read-ins. [13] [ 11 ] The Aeroplan Mile Program was originally owned and operated by Air Canada prior to transferring it to Aeroplan. CIBC and Air Canada entered into a Credit Card Agreement in relation to the Aeroplan Mile Program dated as of January 1, 1995, as amended by a Credit Card Amending Agreement dated October 18, 1999, and by letter dated April 25, 2000 (collectively, the " “1995 Agreement” " ).

On April 1, 2003, Air Canada obtained an order from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (Canada) in relation to its financial restructuring (the " “CCAA Order” " ). Subsequently, and concurrent with the establishment of a $350 million credit facility by CIBC to Air Canada, Air Canada and CIBC entered into a new Credit Card Agreement, dated April 16, 2003 (the " “2003 Credit Card Agreement” " ), which replaced the 1995 Agreement. [14] The 2003 Credit Card Agreement was itself amended by and subject to the following additional agreements:

a) Letter agreement dated October 31, 2003 between Air Canada and CIBC; [15]

b) Letter agreement dated November 28, 2003 between Air Canada and CIBC; [16]

c) Letter agreement dated April 7, 2004 between Air Canada and CIBC; [17]

d) Assignment and Assumption Agreement dated July 5, 2004, between Air Canada (as Assignor), Aeroplan Limited Partnership (as Assignee) and CIBC; [18]

e) Assignment and Assumption Agreement dated June 29, 2005 between APLN Limited Partnership (formerly Aeroplan Limited Partnership) (as Assignor), Aeroplan Limited Partnership (as Assignee), CIBC and Air Canada; [19]

f) Amending Agreement dated September 28, 2006 between CIBC and Aeroplan Limited Partnership; [20]

g) Amending Agreement dated October 2, 2006 between CIBC and Aeroplan Limited Partnership; [21] and

h) Letter agreement dated November 16, 2006 between CIBC and Aeroplan Limited Partnership. [22] [ 12 ] The 2003 Credit Card Agreement, as amended and assigned, governed CIBC’s participation in the Aeroplan Mile Program during the Period under appeal, and therefore also forms the basis of the Aeroplan Supplies and the Aeroplan Payments which are the subject of this Appeal. [23] IV. LAW AND ANALYSIS A. Introduction – Primary Issue - are the Aeroplan Supplies Taxable Supplies? [ 13 ]

Section 165 of the Act provides that GST applies to taxable supplies made in Canada. Subsection 123(1) of the Act provides that a " ““taxable supply” means a supply that is made in the course of a commercial activity” " . Subsection 123(1) of the Act defines a " “commercial activity” " as follows: “commercial activity” of a person means (

a) a business carried on by the person (other than a business carried on without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the business involves the making of exempt supplies by the person, (

b) an adventure or concern of the person in the nature of trade (other than an adventure or concern engaged in without a reasonable expectation of profit by an individual, a personal trust or a partnership, all of the members of which are individuals), except to the extent to which the adventure or concern involves the making of exempt supplies by the person, and (

c) the making of a supply (other than an exempt supply) by the person of real property of the person, including anything done by the person in the course of or in connection with the making of the supply; [ 14 ] Subsection 123(1) of the Act defines " “exempt supply” " to mean " “a supply included in

Schedule V” " of the Act .

Part VII of

Schedule V of the Act provides that certain supplies of financial services are exempt from GST, excluding certain exported financial services that are zero-rated supplies pursuant to

Part IX of

Schedule VI of the Act . In this case, while CIBC initially argued that the Aeroplan Supplies were exempt supplies of financial services pursuant to the Act , it abandoned this position prior to trial. I also note that neither party argued that Aeroplan was not carrying on a business in Canada during the Period or that the Aeroplan Supplies were not otherwise taxable supplies. As such, the Aeroplan Supplies made by Aeroplan to CIBC during the Period will be subject to GST unless a relieving provision of the Act applies, such as

section 181.2 which deems certain supplies of gift certificates not to have been made. [ 15 ] As previously noted, in this case CIBC claimed the Rebate pursuant to

section 261 of the Act on the basis that it paid GST in error in respect of the Aeroplan Supplies. In this respect, CIBC argues that the Aeroplan Supplies are not subject to GST because they are " “gift certificates” " , and therefore deemed not to be supplies pursuant to

section 181.2 of the Act . In contrast, the Respondent argues that the Aeroplan supplies are not " “gift certificates” " , or in the alternative that they are the supply of a promotional or marketing service. Before addressing the specific arguments raised by the parties in relation to the " “gift certificate” " provisions set out in

section 181.2 of the Act , it is, in my view, necessary to characterize the Aeroplan Supplies for GST purposes and determine if they are a single supply of property or services. If the Aeroplan Supplies are a multiple supply of property and or services, it is also necessary to determine if the supply of one or more of the multiple supplies is incidental to another supply such that

section 138 of the Act applies to deem the incidental supply to be part of the other supply. [24] After characterizing the Aeroplan Supplies for GST purposes, it is then necessary to determine if they are subject to GST or if they are the supply of gift certificates and therefore deemed not to be a supply for GST purposes pursuant to

section 181.2 of the Act (and therefore not subject to GST). B. Characterization of the Aeroplan Supplies [ 16 ] The test for characterizing single versus multiple supplies for GST purposes was set out and discussed in Calgary (City) v.

R. , 2012 SCC 20 at paragraphs 31 – 46 as follows: 31 While not precisely on point, guidance on the question of whether there were one or two supplies in this case may be drawn from the way in which courts have dealt with whether a supplier has made a single supply comprised of a number of constituent elements, or multiple supplies of separate goods and/or services. 32 In determining whether a supplier has made a single supply or multiple supplies, the relevant principles were summarized by Justice Rip (as he then was) in O.A. Brown Ltd. v. R. , [1995] G.S.T.C. 40 (T.C.C.).

His approach was confirmed by the Federal Court of Appeal in Hidden Valley Golf Resort Assn. v. R. , [2000] G.S.T.C. 42 (Fed. C.A.). 33 In O.A. Brown , the appellant O.A. Brown Ltd. (“OAB”) bought livestock for customers, but on its own account and at its own risk, not as agent for its customers. Customers would contact OAB's salesman to place an order specifying the type of cattle they required. OAB charged its customers disbursements, such as the cost of branding and inoculations, and a clearing commission, in addition to the cost of livestock.

Livestock is a zero-rated supply for GST purposes, which means that the vendor neither pays GST on his acquisition of the livestock, nor collects it from his customers. The Minister assessed GST on the commission and the other disbursements.

The main issue in the appeal was whether OAB supplied a service of acquiring livestock according to its customers' specifications, or whether it was supplying livestock and other supplies, in which case it should have collected and remitted GST on the other supplies. 34 Justice Rip found that the Value Added Tax statute in the United Kingdom contained many provisions similar to our GST ( Value Added Tax Act (UK), 1983, c. 55). In the English cases the issue had been defined as whether the supply in question comprises a compound supply or a multiple supply.

A compound supply is a single supply with a number of constituent elements which, if supplied separately, some would have been taxed and some not. Multiple supplies are made and taxed separately. 35 O.A. Brown established the following test to determine whether a particular set of facts revealed single or multiple supplies for the purposes of the ETA: The test to be distilled from the English authorities is whether, in substance and reality, the alleged separate supply is an integral part, integrant or component of the overall supply.

One must examine the true nature of the transaction to determine the tax consequences. [p. 40-6] 36 When reaching his decision, Justice Rip made the following observation: ... one should look at the degree to which the services alleged to constitute a single supply are interconnected, the extent of their interdependence and intertwining, whether each is an integral part or component of a composite whole. [p. 40-6] (Citing Mercantile Contracts Ltd. v. Customs & Excise Commissioners , File No. LON/88/786, U.K. (unreported).) 37 Justice Rip also noted the importance of common sense when the determination is made.

McArthur T.C.J. made a similar observation in Gin Max Enterprises Inc. v. R. , 2007 TCC 223 , [2007] G.S.T.C. 56

(T.C.C. [Informal Procedure]), at para. 18: From a review of the case law, the question of whether two elements constitute a single supply or two or multiple supplies requires an analysis of the true nature of the transactions and it is a question of fact determined with a generous application of common sense... 38 Applying the test, Justice Rip found that the disbursements and commission were not charged for services that were “distinct supplies, independent of the whole activity” (p. 40-8) Only if taken together did the activities of buying, branding, inoculation, and other disbursements form a useful service.

He concluded: In substance and reality, the alleged separate supply, that of a buying service, is an integral part of the overall supply, being the supply of livestock. The alleged separate supplies cannot be realistically omitted from the overall supply and in fact are the essence of the overall supply. The alleged separate supplies are interconnected with the supply of livestock to such a degree that the extent of their interdependence is an integral part of the composite whole. ...

The appellant is making a single supply of livestock and the commission and disbursements charged are part and parcel of the consideration for that supply. They do not amount to separate supplies. [pp. 40-8 to 40-9] 39 In O.A. Brown , Rip J. characterized the commission, inoculation, branding and transportation costs not as distinct services but as inputs for the cattle and part of the cost of supplying the cattle.

If this approach is followed, the public transit facilities would not be a separate supply, but would be an input to, or part and parcel of, the supply of the municipal transit service to the Calgary public. 40 Maritime Life Assurance Co. v. R. , [2000] G.S.T.C. 89 (Fed. C.A.), also supports the proposition that work preparatory to, or in order to make a supply, does not become a separate service subject to GST. In Maritime Life , the taxpayer, Maritime Life Assurance Co., issued insurance policies of various kinds, including a number of deferred annuity contracts.

The holder of such a policy would pay periodic premiums to Maritime Life as consideration for the right to receive, on a specified future date, a payment of money or an annuity of equivalent value. 41 The Tax Court judge found two kinds of services were being provided to Maritime Life's policy holders, the insurance services represented by the issuance and administration of the policies, and the services represented by its management of the segregated funds. The Federal Court of Appeal held that the only supply Maritime Life made to the policy holders was the provision of the policies.

Maritime Life administered the policies and maintained the investments that backed its obligations under the policies, but that was the work it had to do to ensure that it remained in position to fulfil its policy obligations. The Federal Court of Appeal reasoned that the work should not be treated as a service that Maritime Life provided to the policy holders, any more than the work undertaken by a cleaning service to keep its cleaning equipment in good repair is a service provided to its clients.

Applying the same reasoning in the present case, the acquisition and construction of the transit facilities, work undertaken by the City to develop a municipal transit service that meets the needs of the Calgary public, would not be treated as a supply that is separate from the supply of the municipal transit service itself. 42 Applying the O.A. Brown test, the question in this appeal is whether, in substance and reality, the alleged separate “transit facilities services” supply is an integral part, integrant or component of the overall supply of “public transit services”.

According to the jurisprudence, if one supply is work of a preparatory nature to another supply (an “input” to that supply), then the input is a part or component of the single overall supply. 43 In my opinion, the true nature of the City's “transit facilities services”, a determination to be made with common sense, was work of a preparatory nature to the supply of a municipal transit service to the public. Transit facilities were constructed, acquired, and made available in order to supply a municipal transit service to the Calgary public.

This would point to the allegedly separate “transit facilities services” being in fact a component of the overall supply of “public transit services” to the Calgary public. 44 Further, the single supply/multiple supplies analysis, as it has emerged, presupposes that several distinct elements or components of a supply can be identified before the analysis can be performed.

In the present case, the alleged separate supplies are so interconnected that it would be difficult to identify distinct elements or components. 45 The purchase of an LRT vehicle (part of the alleged “transit facilities services” provided to the Province), and the operation of that vehicle as part of a municipal transit service (part of the “public transit services” provided to the Calgary public), are distinct activities. However, these activities are better seen as steps taken in order to produce a municipal transit service than they are seen as distinct elements or components of that transit service.

The City's acquisition and construction of the transit facilities served the purpose of enabling the City to provide a transit service to the public. The end result of those activities was that a municipal transit service, featuring several expansions and improvements, could be operated. Nothing else was produced as a result of the activities. In this regard, this case is analogous to O.A. Brown , in which all disbursements and services for which customers were charged ultimately enabled OAB to deliver livestock as ordered by its customers.

Further, the transit facilities have no use and provide no service except to the extent to which they are deployed for use within the Calgary municipal transit service. The interdependence and interconnectedness of the “transit facilities services” and the “public transit services” is obvious. 46 The application of the test for a separate supply would indicate that there is only one supply in the circumstances. However, in the leading separate supply cases, the allegedly separate supplies are provided to single recipients.

The cases do not contemplate a situation in which there are allegedly two recipients of the supply or supplies. In addition to the O.A. Brown test, there are other relevant factors to consider. Here, it has been argued that the “transit facilities services”, which ultimately benefit the Calgary public, provide a separate and distinct benefit to the Province.

To determine whether the Province received any service or benefit from the City, the nature of the respective obligations of the City and Province under the Agreements, having regard to the statutory context, must be analyzed. [ 17 ] The test for determining whether there are single or multiple supplies in a given situation was also discussed by the Federal Court of Appeal in Global Cash Access (Canada) Inc. v.

R. , 2013 FCA 269 , at paragraphs 21 – 26 as follows: Procedural history 21 The Casinos initially believed that the commissions it received from Global in respect of Funds Access Service transactions were exempt from GST. Accordingly, they did not collect GST from Global on the commissions. The Minister of National Revenue concluded otherwise and initially assessed Global for the uncollected GST. The Casinos paid the GST and were reimbursed by Global. Global then filed a rebate application on the basis that the GST had been paid in error. The Minister did not agree and assessed Global for the GST.

The notice of assessment permitted Global to object and, when that did not succeed, to appeal to the Tax Court. 22 As indicated above, the issue before the Tax Court was whether the commissions paid by Global to the Casinos were consideration for a “financial service” supplied by the Casinos. Justice Woods concluded that what the Casinos supplied to Global in exchange for the commission was a bundle of supplies comprised of three elements, described as follows at paragraph 63 of her reasons: 63.

Accordingly, there are three main aspects to the bundle of supplies by the Casinos: (1) allowing kiosks on the premises, (2) providing support services at the cashier cages such as transaction procedures and initiating transactions on behalf of patrons, and (3) cashing Global's cheques. 23 She held that these three elements were not sufficiently interdependent to constitute a “single supply”, and that none of the three elements could properly be characterized as incidental to the other.

Therefore, she considered it necessary to determine which of the three elements, if any, fell within the statutory definition of “financial service”. She concluded that only the third element, “cashing Global's cheques”, fell within the statutory definition. She estimated that the third element represented 25% of the total value of what the Casinos supplied to Global and on that basis she concluded that only 25% of the commission was exempt from GST.

Discussion 24 The parties agree that this was a case of a single supply by the Casinos, not a supply of several things of which only one was within the statutory definition of “financial service”. I agree. 25 It is clear from the contract and from the undisputed facts that none of the three elements of the supply as identified by Justice Woods had commercial efficacy on its own. More importantly, there is no evidence that Global would have been prepared to pay consideration to the Casinos for any of the three elements on its own.

Since the three elements are integrally connected and there is a single consideration, there is a single supply. 26 To determine whether that single supply falls within the statutory definition of “financial service”, the questions to be asked are these:

(1) Based on an

interpretation of the contracts between the Casinos and Global, what did the Casinos provide to Global to earn the commissions payable by Global?

(2) Does that service fall within the statutory definition of “financial service”? [ 18 ] The Federal Court of Appeal also noted the following with respect to this test in Club Intrawest v. R. , 2017 FCA 151 , at paragraphs 80 – 82 : 80 In order to determine whether an overall supply consists of more than one supply, that is whether a supply consists of a compound supply or multiple supplies, one must determine whether an “alleged separate supply is an integral part, integrant or component of the overall supply. ...

One factor to be considered is whether or not the alleged separate supply can be realistically omitted from the overall supply.” ( O.A. Brown , paragraphs 22-23). 81 More recently, in Global Cash Access , this Court looked to the commercial efficacy of an arrangement in order to determine the predominant element of a single supply.

As that predominant element fell within the statutory definition of “ financial service ” in subsection 123(1) of the Act , and did not fall within any statutory exception, the consideration received by the taxpayer in exchange for the supply was not subject to GST. 82 What I take from Global Cash Access is that when applying the Act regard must be had to the predominant element of a single supply. It is an error of law to apply the Act having regard to services that do not form the predominant element of a single supply (see also: Great-West Life Assurance Co. v.

R. , 2016 FCA 316 , [2016] G.S.T.C. 118, [2016] F.C.J. No. 1408 (Fed. C.A.), at paragraph 43 ). [ 19 ] Before applying the O.A. Brown test as described by the Supreme Court of Canada in Calgary (City) and the Federal Court of Appeal in Global Cash Access and Club Intrawest , it is first necessary to determine what supplies (or elements thereof) Aeroplan was making to CIBC in respect of the Aeroplan Supplies.

In this case, the Aeroplan Supplies were made by Aeroplan to CIBC pursuant to the 2003 Credit Card Agreement which, as previously noted, governed CIBC’s participation in the Aeroplan Mile Program during the Period under appeal. At paragraphs 3-14 of the Statement of Agreed Facts (Partial) set out in Appendix " “A” " hereto, the parties summarized the operation of the Aeroplan Mile Program as follows: [25] Aeroplan Mile Program 3. Air Canada operated a loyalty program (the "Aeroplan Mile Program"), which was subsequently transferred to Aeroplan Limited Partnership. 4.

CIBC entered into an agreement with Air Canada dated as of April 16, 2003, as a m ended from time to time (the "Agreement"), which was subsequently assigned to Aeroplan Limited Partnership. 5. Pursuant to the Agreement, CIBC added the "Aeroplan Miles" reward feature to certain CIBC Visa Cards (" Visa AeroCards") and certain mortgages ("AeroMortgages”). 6. The Agreement, inclusive of the relevant amendments, consisted of the following: a. Credit Card Agreement dated as of April 1 6, 2003 between CIBC and Air Canada b. Letter amending agreement dated October 31, 2003 between CIBC and Air Canada c.

Letter amending agreement dated November 28, 2003 between CIBC and Air Canada d. Letter amending agreement dated April 7, 2004 between Air Canada and CIBC e. Assignment and Assumption Agreement dated July 5, 2004 between Air Canada, Aeroplan Limited Partnership ("Old Aeroplan") and CIBC

f. Assignment and Assumption Agreement dated June 29, 2005 between APLN Limited Partnership (formerly Old Aeroplan), Aeroplan Limited Partnership, CIBC and Air Canada g. Amending Agreement dated as of September 28, 2006 between CIBC and Aeroplan Limited Partnership h. Amending Agreement dated as of October 2, 2006 between CIBC and Aeroplan Limited Partnershi p i. Letter amending agreement dated November 16, 2006 between Aeroplan Limited Partnership and CIBC 7. The Aeroplan Mile Program generally operated as follows: a.

Aeroplan entered into agreements with various suppliers of property or services (each, an "Accumulation Partner") under which the Accumulation Partners added the Aeroplan Mile loyalty reward feature to certain of their consumer products. b. An Aeroplan member could earn Aeroplan Miles as and when the member purchased eligible products from any Accumulation Partner. c. The Accumulation Partner in each case would advise Aeroplan of the amount of the member's purchases eligible for Aeroplan Miles and the Accumulation Partner would pay Aeroplan for those Aeroplan Miles. d.

Aeroplan would issue the Aeroplan Miles to the member. e. Once a sufficient number of Aeroplan Miles had been accumulated by the member in his or her Aeroplan account maintained with Aeroplan, the member could redeem the Aeroplan Miles with Aeroplan toward the acquisition of property or services ("Rewards") chosen from a menu of Rewards made available by Aeroplan from time to time. f. Aeroplan would purchase the Rewards from suppliers (referred to as its "Redemption Partners") with which it had agreements for the supply of Rewards. g. The member would receive his or her chosen Rewards. 8.

In CIBC's case, the Aeroplan Mile Program generally operated as follows in respect of its Visa AeroCard product: a. CIBC would issue a Visa AeroCard to a customer ("Cardholder"), and if the Cardholder was not already an Aeroplan member, CIBC would, on behalf of the Cardholder, request Aeroplan to enroll the Cardholder as an Aeroplan member. b. The Cardholder would charge purchases to his or her Visa AeroCard account. c.

At the end of the billing period for the Cardholder's Visa AeroCard account, CIBC would invoice the Cardholder and collect the amount owing on the account from the Cardholder, pursuant to a Cardholder Agreement between CIBC and the Cardholder. d. CIBC would indicate on the Cardholder's Visa AeroCard account statement that the Cardholder had earned an amount of Aeroplan Miles as a result of the credit card purchase transactions. e.

The Cardholder would generally, but not always, earn one Aeroplan Mile for each dollar of purchases charged to the Cardholder's Visa AeroCard account -- the precise number of Aeroplan Miles so earned per dollar of purchases using the Visa AeroCard sometimes varied. f. CIBC would advise Aeroplan of the amount of the Cardholder's purchases eligible to earn Aeroplan Miles and Aeroplan would issue the Aeroplan Miles to the Cardholder by crediting the Cardholder's Aeroplan member account with those Aeroplan Miles. g.

Aeroplan would then invoice CIBC for the Aeroplan Miles at the cost specified in Appendix "D" of the April 16, 2003 Credit Card Agreement or at the cost as modified and set out in the subsequent amendments to the Agreement. h. Provided the Cardholder's Visa AeroCard account remained in good standing, the Cardholder could earn Aeroplan Miles as described above. If and when the Visa AeroCard account was no longer in good standing, the Cardholder would cease being entitled to earn Aeroplan Miles until his or her account was restored to good standing. i.

Subject to any applicable terms and conditions specified in the Agreement and the relevant Cardholder Agreement and Benefits Guide, an Aeroplan member could accumulate Aeroplan Miles in the member's Aeroplan account and, upon accumulating a sufficient number of Aeroplan Miles, the member could redeem all or some of the Aeroplan Miles with Aeroplan for property or services as Rewards offered by Aeroplan at that time. 9. A Cardholder Agreement and a Benefits G u ide were provided by CIBC to Visa AeroCard Cardholders, which generally set out the benefits and the terms and conditions of having a CIBC Visa AeroCard.

These documents included a general description of the benefits and certain terms and conditions specifically associated with the Aeroplan Miles reward feature of the Visa AeroCard. 10. There were certain other circumstances in which CIBC awarded Aeroplan Miles to customers, for example, where a customer paid interest on a CIBC AeroMortgage, opened a new account with CIBC or where CIBC awarded the Aeroplan Miles as a customer service gesture. In these cases, CIBC paid Aeroplan for the Aeroplan Miles so awarded, which were credited by Aeroplan to the customer's Aeroplan member account . 11.

Aeroplan made available a menu of Rewards, which varied from time to time, being prop erty and services that Aeroplan would purchase from Redemption Partners with which it had agreements. Rewards available at various times included, among other things, airline flights, stays in hotels and resorts, car rentals, electronics, a broad selection of brand-name merchandise, concert tickets, spa packages, meals at restaurants, and gift cards from a network of over 20 well-known national retailers such as Gap, the Body Shop, Holt Renfrew, Pier One and Pottery Barn, to name a few. 12.

Aeroplan generally had discretion to change the Rewards made available to Aeroplan members and/or the number of Aeroplan Miles required to obtain any given Reward. 13. Upon redemption of Aeroplan Miles by an Aeroplan member, Aeroplan would incur the cost to acquire the desired Reward from the Redemption Partner. 14. In October 2006, Aeroplan announced that, beginning on January 1, 2007, Aeroplan Miles unused after seven years would expire. Aeroplan Miles accumulated prior to January 1, 2007 would expire on December 31, 2013.

This seven-year expiry policy was subsequently cancelled and various modifications to the Aeroplan Mile Program were implemented as of January 1, 2014. Effective July 1 , 2007, generally Aeroplan members were required to transact with the Aeroplan Mile Program through either one accumulation or one redemption within the last 12 months, or the accumulated Aeroplan Miles would expire.

However, under the letter agreement of November 16, 2006 between CIBC and Aeroplan, Aeroplan agreed that CIBC would have the right to purchase from Aeroplan one Aeroplan Mile for each Cardholder whose Aeroplan Miles would otherwise expire under the new One-Year Expiry Rule with the result that no existing or future Cardholder's Aeroplan Miles wou1d expire pursuant to this Rule. [ 20 ] I will now deal with the 2003 Credit Card Agreement which, in

summary, included the following provisions: [26]

a) section 3 – the 1995 Agreement was repudiated;

b) section 4 – CIBC agreed to produce, issue and administer various credit cards, including the CIBC Aerogold VISA Card, and Aeroplan agreed to provide membership in the Aeroplan Mile Program to allcardholders and credit Aeroplan Miles to all cardholders in accordance with the terms of the 2003 Credit Card Agreement;

c) section 5 – Aeroplan agreed to undertake various referral activities for CIBC, including: i . providing CIBC with information relating to Aeroplan members “as may be required by CIBC for promotion planning and model development …”; ii . providing CIBC with its list of Aeroplan members at least three times per 12 month period for the purposes of enabling the parties to undertake mailings to the persons shown on the list of material related to CIBC’s cards; iii . allow CIBC to place insertions in four mailings per 12 month period to selected Aeroplan members and include CIBC card applications in Aeroplan Welcome Kits; iv . the insertion of articles about the CIBC cards would be placed in three of the six Aeroplan Bulletins issued per year; v . providing space for CIBC card applications to be displayed at Maple Leaf Lounges and other Air Canada counter locations; and vi . providing space for advertising of the cards at airport bridge poster locations; d) (section 6 – CIBC, at its own cost, was to review all card applications and forward a card and Card Welcome Kit to each approved applicant.

CIBC, at its own cost, was also to provide Aeroplan with a list of applicants who were not Aeroplan members, and Aeroplan would then issue an Aeroplan Account number to the applicant and advise CIBC of the Aeroplan Account number. CIBC was granted the sole and exclusive right to manage and administer its VISA services and credit card program;

e) section 7 – CIBC and Aeroplan would mutually design the CIBC cards, and CIBC would at its own cost produce the cards; f) (section 8 – the parties agreed to undertake promotion of the CIBC cards, including: i. the parties would jointly develop a marketing plan for the CIBC Cards each year, including the allocation of costs therefor; ii. the Marketing Budget for the promotion of the CIBC Cards would be in accordance with Appendix “B” of the 2003 Credit Card Agreement; iii. a party could not advertise using the name, trademark etc. of the other party without their prior consent; iv.

CIBC would display card applications at all of its retail branches; v. CIBC would permit Aeroplan to have up to three insertions in card statements each year; vi. Aeroplan agreed not to dilute the Aeroplan program so that it would become materially uncompetitive; vii. The parties agreed to review opportunities to enhance Aeroplan features on the CIBC Cards; viii. The parties agreed that the cost of an Aeroplan Mile for a Corporate Card would be as set out in

section 2 of Appendix “D” of the 2003 Credit Card Agreement;

ix. The parties agreed to certain minimum incremental fees in respect of new products and features that would be payable by CIBC to Aeroplan and the number of Aeroplan Miles that would be issued by Aeroplan in respect thereof; x. CIBC was entitled to designate a specified number of its customers who used CIBC/Aeroplan co-branded financial services products as being qualified for access to Air Canada Maple Leaf Lounges and as being qualified for Aeroplan Prestige status, in both cases for a fee to be paid by CIBC to Aeroplan. xi.

Pursuant to the Advantex Benefit service, CIBC Cardholders would receive additional Aeroplan Miles for purchases at participating merchants in categories such as dining, golf, entertainment and small inns and resorts. CIBC would pay fees for these additional Aeroplan Miles in accordance with

section 5 of Appendix “D” of the 2003 Credit Card Agreement; and xii. The parties would continue discussions in relation to the development and implementation of “Project Maple”;

g) section 9 – provides for the payment of fees by CIBC to Aeroplan in accordance with Appendix “D” of the 2003 Credit Card Agreement;

h) section 10 – sets out certain affinity program requirements, including certain covenants of Aeroplan in respect of the use of trade names and marks;

i) section 11 - set out restrictions on the use of the parties trade marks, service names, logos or other proprietary designations by the other party;

j) section 12 – the parties are to cooperate to ensure the efficient transmission of information between each other and the parties are to share the cost of changes required to CIBC systems; and

k) section 13 – provides for the crediting of Aeroplan Miles to approved applicant Cardholders both in respect of an initial number of Aeroplan Miles and in respect of ongoing purchases made by Cardholders on their CIBC Cards. Aeroplan Miles were also to be issued in respect of customer retention programs and as a customer service gesture. [ 21 ] As previously noted, the 2003 Credit Card Agreement was amended by a series of additional agreements as set out above. While I will not describe all of them in detail, I note the following: (

a) The April 7, 2004 Letter Agreement amended some of the fees payable pursuant to

section 2 of Appendix " “D” " of the 2003 Credit Card Agreement; (

b) In the September 28, 2006 Amending Agreement, the parties added a Revitalization Initiative to the 2003 Credit Card Agreement as set out in a new Appendix “M” to the 2003 Credit Card Agreement, which included adding a Mileage Maximizer initiative to the CIBC Aerogold VISA Card and Small Business Card whereby Cardholders could in specified circumstances obtain 1.5 Aeroplan Miles per dollar spent on qualifying purchases. Aeroplan also agreed to provide promotional support of the Mileage Maximizer initiative, including access to Aeroplan’s marketing channels including email distributions and displays of CIBC marketing content on Aeroplan’s website; (

c) In the October 2, 2006 Amending Agreement, the parties renewed the Advantex Benefit feature used in conjunction with CIBC’s Cards and also set out the fees to be paid by CIBC in respect of any Aeroplan Miles to be issued pursuant thereto; and (

d) In the November 16, 2006 Letter Agreement, the parties agreed to reduce the price paid by CIBC to Aeroplan in respect of the 2003 Credit Card Agreement in relation to changes to the Aeroplan Program announced on October 16, 2006. Pursuant to those changes, an Aeroplan Member who did not have at least one accumulation or redemption transaction with the program in a twelve month period would lose all of his or her Aeroplan Miles.

Pursuant to the agreement, CIBC had the right to purchase one Aeroplan Mile for each CIBC Cardholder whose Aeroplan Miles might expire under the one year expiry rule so that no CIBC Cardholders would lose their Aeroplan Miles. Aeroplan also agreed to an aggregate price reduction of future fees to be paid under the 2003 Credit Card Agreement. The parties also cancelled the September 28, 2006 Amending Agreement and set out new terms in respect of the Mileage Maximizer initiative. [ 22 ] In my view,

section 9 of the 2003 Credit Card Agreement is instructive in characterizing the Aeroplan Supplies for GST purposes.

Section 9 provides as follows: 9. Referral Fees 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, CIBC shall pay to AC in respect of the Cardholders a fee calculated in accordance with Appendix “D”. [ 23 ] Appendix " “D” " of the 2003 Credit Card Agreement is the “FEE AND COST OF AEROPLAN MILE SCHEDULE”. It sets out the various amounts that CIBC was required to pay Aeroplan under the 2003 Credit Card Agreement. In

summary, Appendix " “D” " provides that:

a) Section 1 of Appendix “D” provides for the payment of Referral Fees to Aeroplan pursuant to

section 9 of the 2003 Credit Card Agreement, and reads in part as follows: 1. Referral Fees (Section 9(a)) (

a) 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, CIBC shall pay to AC, in respect of the Cardholders a fee calculated as follows: the sum of: (

i) the total dollars of purchased goods and services billed to all Card Accounts for which at least a minimum payment has been received (other than cash advances, interest, and Card fees and less credit vouchers); less (ii) the total dollars outstanding of all Card Accounts for which CIBC has not received a minimum payment within 6 months of billing, all Card Accounts of Cardholders who have declared bankruptcy and all Card Accounts written off by CIBC in accordance with its usual practices other than outstanding dollars in respect of cash advances and Card fees; multiplied by the “Cost of an Aeroplan Mile” as defined below: …

b) Section 1 of Appendix “D” also provides for the possible issuance of additional CIBC Cards that would participate in the Aeroplan Mile Program. It also provides that all amounts payable under the 2003 Credit Card Agreement are exclusive of taxes, and that CIBC would pay any such taxes in addition to the amounts otherwise payable under the 2003 Credit Card Agreement;

c) Section 2 of Appendix “D” provides for the fees payable in respect of an Aeroplan Mile for a Corporate Card;

d) Section 3 of Appendix “D” provides for the Minimum Incremental Fees payable pursuant to

section 8 of the 2003 Credit Card Agreement;

e) Section 4 of Appendix “D” provides for fee payable by CIBC pursuant to

section 8 of the 2003 Credit Card Agreement in respect of Lounge access and Prestige Status;

f) Section 5 of Appendix “D” provides for the fee payable in respect of the Advantex Benefit pursuant to

section 8 of the 2003 Credit Card Agreement;

g) Section 6 of Appendix “D” sets out the cost per Aeroplan Mile to CIBC for products offered under Project Maple.

h) Section 7 of Appendix “D” provides for the maximum quantum of the pool of Aeroplan Miles to be used for customer retention programs for an upcoming 12 month period. [ 24 ] The invoices submitted by Aeroplan to CIBC in respect of the operation of the Aeroplan Mile Program during the Period are set out in Exhibit A-1, tabs 23-46, and are summarized in the

schedule attached to the Rebate Form. [27] They cover Aeroplan’s monthly billing to CIBC from February 1, 2005 to January 31, 2007. In respect of each month, Aeroplan would issue invoices to CIBC dealing with each of CIBC’s Aeroplan related products, including the CIBC Visa Aerogold card, promotions relating to the CIBC Visa Aerogold card, the CIBC Aero Business card, promotions relating to the CIBC Aero Business card, the CIBC Aero corporate card, and the CIBC Aero Classic card.

Subject to some minor exceptions, the invoices each include a description which references “Participation of CIBC … in the Aeroplan Program”. In addition, the amount owing on each invoice references the number of Aeroplan Miles and the applicable rate per Aeroplan Mile for each activity, including net card purchases, sign up miles, marketing promotions and bonuses, as applicable. The applicable amount of GST and QST is also set out on each invoice.

There are also credits or other adjustments for matters such as rejected Aeroplan Miles or credit notes. [ 25 ] As previously noted, CIBC initially characterized the Aeroplan Supplies as being exempt supplies of financial services in the Rebate Form, its correspondence of March 26, 2007 and May 13, 2009, and in its initial Notice of Appeal dated March 28, 2012. Based on the wording of its initial Notice of Appeal dated March 28, 2012, it would appear that CIBC considered the Aeroplan Supplies to be a single supply, as there is no reference therein to multiple supplies or to

section 138 of the Act . However, in its Further Amended Notice of Appeal dated November 25, 2015, CIBC argued the following at paragraph 20: The only actual supply made by Aeroplan to CIBC under the Aeroplan Program was the issuance or sale of Aeroplan Miles, which constitute a “gift certificate” under the Act . [ 26 ] Although CIBC did not explicitly reference single versus multiple supplies or

section 138 , it has, in essence, pleaded and argued at trial that the Aeroplan Supplies were a single supply which should be characterized as the supply of property (being the Aeroplan Miles), and that the Aeroplan Miles should be characterized as " “gift certificates” " for the purposes of the Act .

In that respect, CIBC argued that the 2003 Credit Card Agreement should be " “read as a whole and the labels used by the parties are not determinative of the true character of what they describe.” " [28] CIBC also argued that " “[w]hile incentivising customers to acquire and use Visa AeroCards was undoubtedly CIBC’s commercial purpose, the transaction between CIBC and Aeroplan was the sale and purchase of Aeroplan Miles.” " [29] [ 27 ] At paragraph 19(

s) of the Respondent’s Fresh as Amended Reply to Further Amended Notice of Appeal, the Respondent noted the following assumption of fact made by the Minister: under the Agreement, the appellant made payments to Air Canada / Aeroplan based on the Cost of an Aeroplan Mile and the payments were consideration for a supply of Aeroplan Miles, which Cardholders would use to redeem for flights; [ 28 ] This is consistent with the Respondent’s primary position that the Aeroplan Supplies should be characterized as a supply of property for the purposes of the Act , albeit not as gift certificates.

I note, however, that the parties did not fully include that assumption in the Statement of Agreed Facts (Partial). [30] I also note that the Respondent argued, in the alternative, that the Aeroplan Supplies should be characterized as a supply of a service for the purposes of the Act . In this respect, the Respondent also included the following assumption at paragraph 19(

j) of the Respondent’s Fresh as Amended Reply to Further Amended Notice of Appeal: Aeroplan supplied marketing and promotional services

j) under the Agreement, Air Canada / Aeroplan agreed to provide “referral services” including the following marketing and promotional activities: i. provide Aeroplan member information to the appellant for the appellant’s Card promotion planning and development; ii. provide Aeroplan member lists to the appellant for mailings by the appellant to promote CIBC Cards; iii. permit the appellant to place insertions in Air Canada / Aeroplan mailings to promote CIBC Cards;

iv. provide space for advertising CIBC Cards and displaying Card applications in Air Canada’s Maple Leaf Lounges and Airport locations;v. provide membership in Aeroplan at no cost to every applicant approved by the appellant;vi. jointly develop an annual marketing plan for the CIBC Card and share promotion costs;vii. be responsible at its own cost for the Aeroplan Welcome Kit;viii. administer and maintain all aspects of the issuance and redeeming of reward certificates for accumulated Aeroplan mileage points at its own cost;ix. agree to increase the seats available for the redemption of Aeroplan Miles and to resolve customer seat redemption issues;x. agree to provide media/marketing support for CIBC Aeroplan products;[29] Considering all of the evidence, it is my view that the Aeroplan Supplies included the following elements as set out in the 2003 Credit Card Agreement:

a) Pursuant to

section 4 of the 2003 Credit Card Agreement, Aeroplan agreed to:i. provide all CIBC Cardholders with membership in the Aeroplan Mile Program; andii. credit Aeroplan Miles to such members in accordance with the 2003 Credit Card Agreement; andb) Pursuant to, inter alia, sections 5 and 8 of the 2003 Credit Card Agreement, Aeroplan agreed to undertake specified referral activities or services and marketing in respect of CIBC’s Cards. These marketing andpromotional services are described in paragraph 19(

j) of the Respondent’s Fresh as Amended Reply to Further Amended Notice of Appeal.[30] As previously noted, the parties in this case have both argued in essence that the Aeroplan Supplies should be characterized as a single supply by Aeroplan to CIBC for GST purposes. In this respect, it is my viewthat the various elements of the Aeroplan Supplies are all constituent elements of a single compound supply, being the supply of the Aeroplan Mile Program by Aeroplan to CIBC.

It is also my view that the individualelements 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. I also note that there is no evidencethat 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”" foreach of CIBC’s credit cards, generally computed with reference to the number of Aeroplan Miles issued during the relevant billing period.

In this respect, it is also my view that CIBC was the only "“recipient”" of theAeroplan Supplies, as that term is defined pursuant to subsection 123(1) of the Act.[31] The question remains, however, as to whether the Aeroplan Supplies should be characterized as a single compound supply of property or a single compound supply of services. Based on the O.A.

Brown test asdeveloped by the Supreme Court of Canada in Calgary (City) and the Federal Court of Appeal in Global Cash Access and Club Intrawest, this characterization is undertaken by considering all of the elements of the singlecompound supply and determining which of those elements is the predominant element of the single compound supply. In other words, what is the true nature or raison d'être of the single compound supply.[32] In my view, the Aeroplan Mile Program is a marketing and promotional program or service.

In my view, the true nature or raison d'être of the Aeroplan Mile Program, the 2003 Credit Card Agreement and theresulting Aeroplan Supplies is to market and promote applications for and increased use of participating CIBC credits cards (and other participating CIBC financial products such as mortgages). The wording of both the2003 Credit Card Agreement and Aeroplan’s invoices to CIBC makes this clear. As previously noted, both

section 9 and Appendix "“D”" of the 2003 Credit Card Agreement clearly indicate that the Aeroplan Paymentsare "“[in] consideration of AC referring or arranging for Aeroplan Members and other members of the public to make Card Applications and in considered of AC performing its other obligations herein which areincidental to the foregoing”." In effect,

section 9 of the 2003 Credit Card Agreement explicitly stipulates that the marketing and promotional services (the referral activities) are the predominant element of the AeroplanSupplies and further provides that all other supplies are incidental thereto. In addition, each of the monthly invoices issued by Aeroplan to CIBC in respect of the Aeroplan Supplies stipulates that the invoice is for“participation of CIBC … in the Aeroplan Program”. I also note the following testimony of Mr.

Webster regarding why CIBC chose Aeroplan and CIBC’s business rationale for using Aeroplan: [31]CIBC chose Aeroplan, I think, for two key reasons and these have remained, I think, pretty constant throughout the time we have offered Aeroplan.One is that the Air Canada Frequent Flyer Programme, Aeroplan, is appealing to frequent flyers, and frequent flyers are an appealing demographic group for CIBC, in that they tend to spend more money andthey are a profitable group of clients from a credit card perspective.The second reason which is closely related to the first is that by offering Aeroplan miles when you use your credit card it encourages clients to consolidate their spending on our card, rather than spending oncompetitive credit cards. [32]…So our business rationale was that they were a very attractive reward that clients wanted, and so would allow us, as I said, to attract more customers to CIBC, which we did, and that they would use their cardmore which they did. [33][33] Overall, it is my view that the marketing and promotional services are the predominant element of the Aeroplan Supplies, and that the Aeroplan Payments were computed with reference to the number of AeroplanMiles which were issued in a particular billing period as a convenient method for calculating the value of the marketing and promotional services provided by Aeroplan to CIBC. [34][34] Had I determined that the individual elements of the Aeroplan Supplies were separate and therefore multiple supplies, I would have also determined that

section 138 of the Act would have applied to deem the supplyof the Aeroplan Miles to be incidental to the marketing, promotion and other services provided by Aeroplan to CIBC such that the multiple supplies would be deemed by

section 138 to be a supply of a service, being thesupply of the Aeroplan Mile Program by Aeroplan to CIBC.[35] Based on all of the foregoing, it is my view that the Aeroplan Supplies were a single compound supply of promotional and marketing services by Aeroplan to CIBC. In the alternative, if the supply of the AeroplanSupplies included multiple supplies, one of which was the separate supply of Aeroplan Miles, it is my view that the supply of the Aeroplan Miles was incidental to the supply of promotional and marketing services byAeroplan 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. In either event, theAeroplan Supplies which were made by Aeroplan to CIBC should, in my view, be characterized as the supply of a service for the purposes of the Act. As it is my view that a gift certificate for the purposes of

section 181.2of the Act must be a form of property, and the definition of service in subsection 123(1) of the Act specifically excludes property, it is my view that a service cannot be a gift certificate for the purposes of

section 181.2 ofthe Act. As such, it is my view that the supply of the Aeroplan Supplies by Aeroplan to CIBC during the Period cannot be characterized as a supply of gift certificates for the purposes of

section 181.2 of the Act. As aresult, it is my view that the Aeroplan Supplies were taxable supplies for the purposes of the Act, and that CIBC therefore properly paid GST in respect of the Aeroplan Supplies and Aeroplan Payments. In my view, thisconclusion is dispositive of all of the issues raised by the parties in this Appeal. I will, however, discuss the other issues raised by the parties in this Appeal. C. Are Aeroplan Miles Gift Certificates [36] Notwithstanding my conclusion that the Aeroplan Supplies were supplies of services and therefore cannot be a supply of gift certificates for the purposes of

section 181.2 of the Act, I will in the alternative consider ifthe Aeroplan Supplies were supplies of "“gift certificates”" for the purposes of

section 181.2 of the Act on the premise that the Aeroplan Supplies should be characterized as a single compound supply of intangibleproperty (in the form of the Aeroplan Miles). [35] For the reasons that follow, it is my view that the Aeroplan Miles (and by extension the Aeroplan Supplies) at issue in this Appeal were not "“gift certificates”" within themeaning of

section 181.2 of the Act.[37]

Section 181.2 of the Act reads as follows:181.2 Gift certificates — For the purposes of this Part, the issuance or sale of a gift certificate for consideration shall be deemed not to be a supply and, when given as consideration for a supply of property or aservice, the gift certificate shall be deemed to be money. [emphasis added][38] The phrase "“gift certificate”" is not defined in the Act, and appears in only a few instances in the Act. For our purposes, the most relevant of those other instances is in

section 181, which deals with the treatment ofcoupons for GST purposes, where subsection 181(1) defines "“coupon”" as follows:“coupon” includes a voucher, receipt, ticket or other device but does not include a gift certificate or a barter unit (within the meaning of

section 181.3). [emphasis added][39] As noted, the definition of "“coupon”" is defined broadly on an inclusive basis, but specifically excludes a "“gift certificate”". As such, gift certificates are generally carved out of the coupon rules in

section 181 ofthe Act, and are dealt with in accordance with

section 181.2 of the Act, assuming they meet the requirements of that provision. It is important to note, however, that a gift certificate that is not issued or sold forconsideration could potentially be excluded from the operation of both sections 181 and 181.2 of the Act. [36] I also note that it is at least theoretically possible that something might be a gift certificate but not a coupon.[37][40]

Section 181.2 describes two linked transactions. It describes both the issuance or sale of a gift certificate (the first transaction) and its subsequent redemption (the second transaction). In particular, it provides that theissuance or sale of a gift certificate for consideration is deemed not to be a supply for GST purposes, and is thus not subject to GST. In addition, it provides that the subsequent redemption of the gift certificate in exchangefor goods or services should be treated as a payment with money.

The supply of the goods or services is thus subject to GST, if applicable, and the total price, including any applicable GST, is reduced by the amount of theredeemed gift certificate. The two transactions are arguably linked, as the reference to "“the gift certificate”" (used in the context of the second transaction) in

section 181.2 arguably means that only a gift certificate that isissued or sold for consideration (in the first transaction) will be deemed not to be a supply (for the purposes of the first transaction) and will be treated as money when redeemed (for the purposes of the second transaction).As a result, it is arguable that a gift certificate that is not issued or sold for consideration will not be treated as money pursuant to

section 181.2 when redeemed, even if it otherwise meets the criteria for being a giftcertificate. I note, however, that this Appeal only deals with the potential application of the first of such transactions, being the issuance or sale of a gift certificate for consideration.[41] The principles of statutory

interpretation applicable in this case are well established and were summarized by the Supreme Court of Canada in Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, at paragraph 10as follows:10 It has been long established as a matter of statutory

interpretation that “the words of

an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme ofthe Act, the object of the Act, and the intention of Parliament”: see 65302 British Columbia Ltd. v. R., (SCC), [1999] 3 S.C.R. 804 (S.C.C.), at para. 50. The

interpretation of a statutoryprovision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole. When the words of a provision are precise and unequivocal, theordinary meaning of the words play a dominant role in the interpretive process. On the other hand, where the words can support more than one reasonable meaning, the ordinary meaning of the words plays alesser role. The relative effects of ordinary meaning, context and purpose on the interpretive process may vary, but in all cases the court must seek to read the provisions of

an Act as a harmonious whole.[42] While

section 181.2 of the Act appears very straightforward in terms of how it should be applied for GST purposes, it is often difficult to apply in practice for a number of reasons, including the following:(

a) because the phrase "“gift certificate”" is not defined in the Act;(

b) because of the variety of similar promotional devices and transactions that have been developed for use by businesses in Canada; and(

c) because there a number of other provisions of the Act which may apply, depending on how a particular promotional device or transaction is characterized for the purposes of the Act.

[ 43 ] In my view, the meaning of " “gift certificate” " , from a textual perspective, is unclear. In the absence of any given definition or list or required attributes, it is often difficult to determine if

section 181.2 applies for GST purposes in respect of a particular device or transaction, or whether another provision of the Act should apply. For example, the following provisions of the Act set out the GST rules for dealing with the following kinds of promotional devices or transactions: (

a) section 181 – treatment of coupons (excluding gift certificates and barter units); (

b) section 181.1 – treatment of rebates (such as manufacturer’s rebates); (

c) section 181.2 – treatment of gift certificates issued for consideration; (

d) section 181.3 – treatment of barter exchange networks (barter units); (e) section 232(1) – adjustments, refunds or credits of tax; (f) section 232(2) – adjustment (reduction of consideration); (g) section 232(3) – credit and debit notes; and (

h) section 232.1 – promotional allowances. [ 44 ] Considering the variety of promotional and other devices and transactions developed for use by businesses in Canada, the line between the application of these various GST provisions is often blurred. For example, in Nestlé Canada Inc. v. R. , 2017 TCC 33 , the issue was whether “instant rebate coupons” (or IRCs) (which reduced the purchase price of Nestlé products purchased by consumers at Costco Wholesale Canada Ltd.) should be treated as coupons (pursuant to

section 181 ) or promotional allowances (pursuant to

section 232.1) for GST purposes. If the instant rebate coupons were treated as coupons for the purposes of

section 181 of the Act , Nestlé was potentially eligible for a GST input tax credit in respect of the instant rebate coupons pursuant to subsection 181(5) of the Act . In that case, Lamarre ACJ concluded that the " “instant rebate coupons” " were promotional allowances for GST purposes, and that therefore

section 232.1 of the Act applied to the instant rebate coupons.

In making that determination, Lamarre ACJ noted the following at paragraphs 28-30 and 37-45 in discussing the potential application of sections 181 and 232.1 in the circumstances of that case: 28 What makes matters confusing in the present situation is that, during the relevant period, Nestlé made available to Costco customers paper coupons (which were handed out to customers when they entered the Costco warehouses, as stated in the Appellant's written submissions at para. 12), and it is not disputed that the IRCs were considered by Nestlé as having the same characteristics as the paper coupons.

This is reflected by the fact that the GST/HST charged to the Costco customers who benefited from IRCs was charged on the pre-discount price, as is required by subsection 181(2) when a registrant accepts as consideration for a taxable supply a coupon that entitles the recipient of the supply to a reduction of the price equal to a fixed dollar amount specified on the coupon.

Furthermore, the Nestlé-Costco transaction seemed to imply a coupon arrangement for both the paper coupons and the IRCs, as they were governed by the terms of the same contract between Nestlé and Costco. 29 But even though Nestlé and Costco treated the IRCs as coupons, this is not sufficient for them to be characterized as such. For them to be so characterized, the terms of

section 181 must be met. The FCA, in Tele-Mobile , made it clear that there cannot be a coupon unless something is submitted by the purchaser for acceptance as full or partial consideration for the taxable supply, and the coupon thus tendered, whether physical or electronic, must entitle the purchaser to a reduction of the price equal to a fixed dollar amount specified on the physical or electronic device. 30 In the present case, when the Nestlé product was purchased by the customer, the customer did not tender any coupon (physical or electronic) to the cashier.

The Costco membership card, although it granted access to Costco products, did not contain any specific information about the IRCs, as no fixed dollar amount reduction for the particular Nestlé product was specified on that card. … 37 The conclusion that the IRCs fit better within the definition of a promotional allowance than of a coupon also makes sense as a matter of policy. 38 Under subsection 181(2), Costco is required to collect GST/HST on the pre-discount price of the Nestlé products. 39 Subsection 181(2) thus requires the customer to overpay GST/HST on the Nestlé products and then deems the customer to have paid only the GST/HST attributable to the post-discount price.

The reason for implementing this practice was explained by counsel for the Respondent in his oral submissions, in which he referred the Court to the policy underlying the treatment of discount coupons. The object of the practice was to simplify the treatment of coupons for small grocers, who, in the 1990s, did not have easy access to cash registers that, for the purpose of the application of the GST/HST, could distinguish between coupons for taxable supplies and coupons for non-taxable (or zero-rated) supplies. 40 This excess GST/HST does not go to the government however.

Instead, subsection 181(5) allows the provider of the coupon, here Nestlé, to obtain an input tax credit for the excess GST/HST paid by the Costco customer. 41 The benefit represented by this additional input tax credit, received at the customer's expense, is why Nestlé is claiming that its transactions fit within the

section 181 coupon regime, instead of the

section 232.1 promotional allowance regime. By contrast, under the

section 232.1 promotional allowance regime, the customer pays GST/HST on the reduced price of the supply. 42 In the present case, Nestlé and Costco treated the discount as falling under the coupon regime at the customer's expense. 43 The Federal Court of Appeal, in Tele-Mobile , was concerned that a relaxation of the tendering requirement would allow any discount arrangement to be considered a coupon, which in turn would require the customer to overpay GST/HST and result in the provider of the coupon obtaining the benefit of this excess payment through an input tax credit. Such an

interpretation would diminish the significance of the — arguably token — formality of the tendering requirement that must be met in order for the supplier to obtain the input tax credit. Thus, customers would always pay too much GST/HST and coupon providers would always get the benefit of an input tax credit, which, from a certain perspective, is like the government providing a quasi-subsidy to coupon providers through the GST/HST regime. Such an

interpretation of the legislation would also render one provision, here

section 232.1, virtually meaningless and would thus be contrary to the statutory

interpretation guidelines established by the Supreme Court of Canada (See Canada (Attorney General) v. JTI-Macdonald Corp., supra ). 44 According to the

interpretation of

section 181 set out in the Tele-Mobile case, Parliament requires the customer to tender some kind of coupon as a bright-line condition that must be met before the provider of the coupon can obtain the benefit of an input tax credit for the excess GST/HST paid by the customer. If this requirement is not met, the transaction will fall under the promotional allowances regime, which constitutes a residual category. 45 I accordingly conclude that the IRCs were promotional allowances, not coupons. Nestlé will therefore not be able to claim ITCs on the IRCs and the customer will not recover the tax overpaid.

In a promotional allowance context, GST/HST should have been collected only on the post-discount price. In that context, I realize that the Minister has received a windfall. … [ 45 ] Similar tensions and concerns arise in this case. CIBC argues that Aeroplan Miles are gift certificates for the purposes of

section 181.2 of the Act , and that therefore it was eligible to claim the Rebate in respect of the GST it argues it paid in error. The Respondent argues, however, that the Aeroplan Miles were not gift certificates for the purposes of

section 181.2 of the Act , and that CIBC properly paid GST in respect of the Aeroplan Supplies (and Aeroplan Miles) and therefore was not eligible to claim the Rebate in respect of GST paid in error. The Respondent also argues that, in considering whether the Aeroplan Miles were gift certificates, this Court does not have to determine if the Aeroplan Miles were another type of promotional device or transaction for the purposes of the Act (such as, for example, coupons). Rather, the Court only has to determine if the Aeroplan Miles were, o

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