Changes have been made in Git (master):

commit bba98f46af2d2927d9325e7eb5908ac8a69af148
Author: Michael M Slusarz <slusarz@horde.org>
Date:   Wed Sep 11 14:01:20 2013 -0600

     [mms] Fix parsing SMTP error message on servers that support 
ENHANCEDSTATUSCODES (Bug #12666).

  framework/Smtp/lib/Horde/Smtp.php |    2 +-
  framework/Smtp/package.xml        |    4 ++--
  2 files changed, 3 insertions(+), 3 deletions(-)

http://git.horde.org/horde-git/-/commit/bba98f46af2d2927d9325e7eb5908ac8a69af148

Fixed in Horde_Smtp 1.2.3.

Changes have been made in Git (master):

commit c2f6d07a7c4abe7d83c7261bfc3c67e534023a95
Author: Michael M Slusarz <slusarz@horde.org>
Date:   Wed Sep 11 14:01:20 2013 -0600

     [mms] Fix parsing SMTP error message on servers that support 
ENHANCEDSTATUSCODES (Bug #12666).

  framework/Smtp/lib/Horde/Smtp.php |    2 +-
  framework/Smtp/package.xml        |    4 ++--
  2 files changed, 3 insertions(+), 3 deletions(-)

http://git.horde.org/horde-git/-/commit/c2f6d07a7c4abe7d83c7261bfc3c67e534023a95

See below - test was to a non-existent local account, compose window 
returned only "There was an error sending your message: "

(Edited only for names and hashes)
S: 220 mail.example.com ESMTP Sendmail 8.14.4/8.14.4/Debian-2ubuntu2; 
Wed, 11 Sep 2013 15:23:17 -0400; (No UCE/UBE) logging access from: 
localhost(OK)-localhost [127.0.0.1]
C: EHLO mail
S: 250-mail.example.com Hello localhost [127.0.0.1], pleased to meet you
S: 250-ENHANCEDSTATUSCODES
S: 250-PIPELINING
S: 250-EXPN
S: 250-VERB
S: 250-8BITMIME
S: 250-SIZE
S: 250-DSN
S: 250-AUTH DIGEST-MD5 CRAM-MD5 LOGIN PLAIN
S: 250-STARTTLS
S: 250-DELIVERBY
S: 250 HELP
C: STARTTLS
S: 220 2.0.0 Ready to start TLS
C: EHLO narwhal
S: 250-mail.example.com Hello localhost [127.0.0.1], pleased to meet you
S: 250-ENHANCEDSTATUSCODES
S: 250-PIPELINING
S: 250-EXPN
S: 250-VERB
S: 250-8BITMIME
S: 250-SIZE
S: 250-DSN
S: 250-AUTH DIGEST-MD5 CRAM-MD5 LOGIN PLAIN
S: 250-DELIVERBY
S: 250 HELP
C: AUTH DIGEST-MD5
S: 334 bXXXX.......XXXXD
AXXXX.......XXXX=
[AUTH Command - method: DIGEST-MD5; username: ian]
S: 535 5.7.0 authentication failed
C: AUTH CRAM-MD5
S: 334 PXXXX.......XXXX==
[AUTH Command - method: CRAM-MD5; username: ian]
S: 535 5.7.0 authentication failed
C: AUTH LOGIN
S: 334 VXXXX.......XXXX6
C: aXXu
S: 334 UXXXX.......XXXX6
[AUTH Command - method: LOGIN; username: ian]
S: 235 2.0.0 OK Authenticated
C: MAIL FROM:<iviemeister@nutleyschools.org> SIZE=544
C: RCPT TO:<xyz@example.com>
S: 250 2.1.0 <validuser@example.com>... Sender ok
S: 550 5.1.1 <xyz@example.com>... User unknown
C: RSET
S: 250 2.0.0 Reset state
C: QUIT
S: 221 2.0.0 mail.example.com closing connection

Can't reproduce.  I correctly receive the details of the error message 
(without the SMTP response codes) if the SMTP server issues an error.

At a minimum, you will need to provide an SMTP log of the process that 
is throwing the error that is not displayed correctly ('debug' 
parameter of the SMTP configuration in imp/config/backends.local.php)

When sending to addresses that the local SMTP server will reject 
(invalid accounts at local domains, for instance), the error code and 
message (such as "There was an error sending your message: 550 5.1.1 
<testxyz@example.com>... User unknown") is not displayed in the IMP 
Compose window.

Instead, IMP just displays "There was an error sending your message: "

It looks like in imp/lib/Compose.php, line 847, $e->getMessage() is 
always returning an empty string.

Somewhere between the Horde_Smtp_Exception being thrown from 
_getResponse in Horde/Smtp.php and imp/lib/Compose.php catching 
IMP_Compose_Exception, the error details are getting lost.

horde                     5.1.4
imp                       6.1.4
Horde_Core                2.8.0
Horde_Mime                2.2.5
Horde_Smtp                1.2.2