Magistrate Olivia Mariga deferred the case to May 26.
In the High Court application, Masunda and the councillors said their placement on remand was in contravention of the constitution.
Masunda and the councillors were last month charged with criminal defamation after flamboyant Harare business mogul Phillip Chiyangwa complained that he had been defamed by the publication of a council report on how he acquired vast tracts of land in the capital.
Following the adoption of the controversial report, council made a police report against Chiyangwa accusing him of land theft.
The mayor and his councillors are, therefore, arguing in the High Court that they could not be placed on remand when they were the complainants.
Police have acknowledged receiving reports from the council against Chiyangwa and Local Government Minister Ignatius Chombo.
Five journalists were subpoenaed by the state to testify in the matter after they broke the land scandal story.
The five journalists are Vincent Kahiya, editor-in-chief of the Zimbabwe Independent, editor of the Standard Nevanji Madanhire and two Standard reporters, Jeniffer Dube and Feluna Nleya. Dube and Nleya co-authored the story that was carried by the Standard.
Freelance journalist Stanley Gama has also been summoned for his story which was published by the South African-based Sunday Times.
Meanwhile, Prime Minister Morgan Tsvangirai this week said the Harare City Council land saga was now being discussed at the highest national political level.
President Mugabe and himself were discussing the issue and justice would be seen to be done, the premier promised at a news conference.
Tsvangirai said he was surprised those named in the damning report exposing alleged corruption were the ones that had sought to make themselves victims.
He said he would discuss the issue with Mugabe as soon as he was back from the World Economic Forum meeting in Tanzania.
“We are aware of the intimidation of councillors and unnecessary threats by some people in government.
The matter is now a political matter and I have brought that to the attention of the president,” he said.
“As for now the issue is a political issue between me and the president and hopefully the matter will be finalised and justice will take its course.”