A Labour MP's member's bill was defeated on the narrow majority of 62-60 in Parliament on Wednesday.
The government usually has a stronger majority than that because it can rely on Act's five votes, but in this case Act split its vote, casting four opposed to the bill and one in favour.
Luamanuvao Winnie Laban's bill would have strengthened the rights of families of mental health patients to access and information.
The government says existing legislation was adequate.
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Labour, the Greens, the Maori Party, the Progressive Party and United Future's Peter Dunne supported the bill. National and four Act MPs opposed it.
