South Oxfordshire District Council is suing its former dustbin collection firm for millions of pounds for breach of contract.

It has already rejected one out-of-court settlement offer as inadequate, and is set to go to the High Court over the issue.

Chief executive David Buckle said: "We still hope to get an out-of-court settlement to resolve this problem but we are prepared to go all the way if necessary."

The firm being sued is Sita UK, based in Maidenhead. Its contract was terminated in 2001, five years early, after complaints about its performance.

Mr Buckle said: "It wasn't a case of just a few houses being missed out -- there were whole rounds all over the district which were never done.

"We got round the table with Sita to see if we could sort out the problem but we could not reach any sort of agreement within the contract.

"We had no choice but to terminate the contract and go out to tender again. No-one likes terminating a contract but we were left with no alternative."

The council subsequently appointed Grundon, of Ewelme.

Damages sought are the difference between the Sita contract and Grundon's, multiplied by five because of the number of years still left to run on the Sita contract.

Mr Buckle said: "The compensation being sought runs into millions of pounds."

No-one at Sita's head office was prepared to discuss the issue.