The error message you're getting is from the perl module Mail::Sender, and the docs for that module have this to say:
If you get a "Local user "email@example.com" unknown on host "zzz"" message
it usualy means that your mail server is set up to forbid mail relay.
That is it only accepts messages to or from a local user. If you need
to be able to send a message with both the sender's and recipient's
address remote, you need to somehow authenticate to the server. You may
need the help of the mail server's administrator to find out what
username and password and/or what authentication protocol are you
supposed to use.
However, I'm not sure what the specific solution to this problem is, but I would start by comparing the settings in the "Mail Settings" section of global.conf and the settings/requirements of your mail server. If you can post some of those details here, somebody might recognize the specific problem you're having.