I Take what i said early back, Linden Labs Help Desk fixed my merchant box problem - they was very polite and very proffesional and fixed it within a short time after contacting them.
Linden labs logged into my account and found out that somehow my merchant box system folder had been deleted and was in my trash folder, I still see no sign of a merchant outbox system folder but at least it is working now - Thank you very much Linden Labs for fixing this problem in a short space of time.
on a side note i have had problems with system folders for a long time such as having 4 trash folders - and one of which is in my lost and found - this happened when i installed imprudance - so im guessing its something to do with that.