When my school calculated my gpa for their own internal records they only included the most recent attempt of the course, whether or not it was a better grade. In my case, I did better the second time around so it showed up on my unofficial transcript that I repeated the course but the first grade was dropped and only the better grade was used for my gpa calculation. However, on my official transcript it shows the grade I received both times I took the course, and it shows it as two separate courses even though I took the course in different semesters.
OLSAS website states "All courses and marks, including failed, incomplete, repeated and supplementary courses, and courses extra to degree requirements are included in the GPA."
So to answer your question, both of my grades were included. Not sure if it was taken as an average or counted as a separate course.
Also wanted to add, I don't really think the school policies of whether they include the grade in the gpa calculation matters. I believe that in order to make it consistent across all schools, OLSAS just uses all grades that were taken regardless of individual school policies.