Brentwood's Health trust is accused of failing in its duty towards mentally ill patients at Warley Hospital.
Liberal Democrat borough councillor, Michael Taylor, made the allegation following a visit to the 150-year-old Victorian main building at Warley Hill.
Speaking at a meeting of Brentwood's planning committee last week, he said: "Anyone who visited E block would see that patients do not have the privacy or dignity they deserve".
And the Warley representative accused the Barking, Havering and Brentwood Community Health Care Trust of "a failure to meet their duty of care".
He made his comments just before fellow councillors unanimously threw out a controversial move by the Trust to build new wards at Mascalls Park to house E Block patients because of environmental concerns.
The Trust had wanted to move the 50 elderly patients out of the block into two new wards.
Cllr Taylor, said: "In Mascalls Park they could not have chosen a more sensitive site. I am concerned about the enormous buildings and the excessive car parking provision, with the loss of trees and landscaping."
The Trust wanted planning permission for three prefabricated buildings for five years, plus internal access roads and car parking.
A Trust spokesman said: ''A building of this age is inevitably no longer an ideal health care setting. Substantial sums of money have been spent but it would take in £4.5m to bring the building up to standard.
''We cannot agree that the current situation is indicative of a failure to meet our duty of care.''
On the planning decision a disappointed Sandra Knowles, the Trust's chief executive, said: "Our application for planning permission was based purely on achieving a better care environment for our patients and their safety, care and the environment they live in, and our staff work in, has been and still is our single over-riding concern."
She said the Trust was reviewing its options.
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