Lloyd's Maritime and Commercial Law Quarterly
Are intangible assets fungible?
Roy Goode *
fungible
precisely or acceptably replacing or replaceable by another item, mutually interchangeable; esp. of goods, etc, contracted for, when a particular item is not specified†
This article re-examines the concept of fungibility in regard to intangible property. It argues that since fungibility involves a choice between legally interchangeable units, an interest in a particular issue of shares, a particular debt or a particular managed fund which is not divisible by transfer into separate units capable in law of being separately owned is simply a co-ownership right in a single asset. It follows that the transfer of such an interest or a declaration of trust relating to it is not vulnerable for want of identification and that where there is an agreement for transfer and later retransfer of the shares or debt the subject-matter of the retransfer obligation is not simply the equivalent of what was transferred but is the identical subject-matter. Thus the holder of shares of a particular issue is the co-owner of a single asset, the issued share capital, since it is impossible for the shares to be held or transferred independently of the remainder of the share capital, and the assignee of part of a single debt is co-owner of the debt. Only if the transfer obligation requires a selection to be made from two or more issues of shares or two or more distinct debts does any question of ascertainment of the subject-matter arise. Interests in securities held through an intermediary are likewise co-ownership interests, whether held in a segregated (“non-fungible”) account or in an omnibus (“fungible”) account.
1. INTRODUCTION
The decision of the Court of Appeal in Hunter
v. Moss
1
has attracted much debate. It will be recalled that the case concerned a declaration of trust by which the defendant had declared himself to be a trustee for the plaintiff of 5% of the issued share capital of a company in which the defendant held 950 out of a total issued share capital of 1,000 shares. The trial judge held that the trust attached to the defendant’s shareholding, so that
* Emeritus Professor of Law in the University of Oxford and Emeritus Fellow of St John’s College, Oxford. This is a slightly revised version of a paper contributed as ch. 7 of Peter Birks and Arianna Pretto (eds), Themes in Comparative Law, In Honour of Bernard Rudden
(Oxford University Press, 2002) 97 and is reproduced by kind permission of the editors and publishers. I have taken the opportunity to clarify some points following an exchange of correspondence with Professor Rudden, to whom I am indebted.
† The New Shorter Oxford English Dictionary.
1. [1994] 1 W.L.R. 452, affirming the decision of Mr Colin Rimer, Q.C. [1993] 1 W.L.R. 934.
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