Thank you Scott
I followed your instructions and found that my 'automatic name checking' was
already enabled.  But the problem persists.
Here's a bit of extra information:
When I type in the to field   'joe'   it automatically auto completes to
'joe soap'  As I do indeed want to email mr soap, I click OK.

But I then get a 'check names'  dialogue box

It says 'Microsoft Outlook does not recognise Joe Soap'  <which is crazy
because his full contact details ARE definitely in my contacts database>

I then click on 'show more names'

And I get a message in a pop up which says:

The address list counld not be displayed. The contacts folder associated
with the address list could not be opened. it may have been moved or deleted
or you do not have permissions.....  Let me tell you another thing.  Some
time ago, I moved my outlook.pst file  into the folder 'my  documents'    

When I click OK on this warning message, I am taken to a page which says

'Show names for the   'contacts'  the contacts is a drop down box, in the
same drop down box there is another option (also called contacts),  if I
select 'the other contacts' option,  I then see all my contacts (yippie)
displayed below.  Sounds like I have got 2 contacts files , one is blank and
the other has all the correct data in it.  

Do I need to tell the programme the new location for my outlook.pst file ?  
If so how?