I had a letting agent who whilst being extremely slow to pay me has it appears also failed to pay back the deposit he held to my last tenant. Given the poor performance I moved agents and the old agent now appears to have gone out of business. I am now being pursued by the tenants solicitor to repay the deposit that the agent has failed to pay as he claims I am responsible for his actions. The thought of having to repay money I never had is not appealing, but nor is being taken to court. Has anyone had any experience of this before or know my true legal position.

Check your tenancy agreement. It probably says that YOU will take a deposit from the tenant and YOU will return it at the end of the tenancy. If so, and I were the tenant, I would certainly pursue you for the money. That just leaves you to recover from the agent but if he has gone out of business you will have no joy there. If I were you I would do the honourable thing and pay the tenant. After all its not their fault that you agent messed up.