Ok I have tried all the suggestions. I ran Scanpst.exe (no help), unchecked outlook properties compatibility mode, I uninstalled Office & re-installed office again and I still get the same message when trying to open outlook.
I found the Outlook.pst file located under local instead of roaming, copied it to roaming and outlook still has the same message. Under roaming the Outlook file was .NK2 before I added outlook.pst
Any other suggestion?