I know what "fungibility" means, But note the boldfaces in my post. That is exactly what I wrote. The court ruled that that physical banknote was not the victim's property any more. But of course the 20£ (as abstract amount) that the thief stole remained the victim's property, and the government would take 20£ from the thief and return then to the victim, if they were to identify him and found that he had that much money in his possession or in his bank account.
EDIT: quote markup
Same principle applies to a bitcoin theft. A bitcoin thief, if caught, will have his property gets seized and returned to the victim.
There is just no guarantee that the police would catch a banknote thief or a bitcoin thief. However, this is a matter of the police's competency, not whether bitcoin is better or worse than banknote.