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I contacted the Records Office at Durham and got this reply.  I was impressed by the speed of the reply, within a couple of hours, and the amount of help.  I am hoping that I will be able to find out more from them.

We hold case papers for Winterton Hospital (Sedgefield Lunatic Asylum) up to 1945.  After that date we retain only a 2% sample of Winterton Hospital patient files (case notes).
 
The way that case notes for Winterton Hospital are recorded is complex and, although some are indexed, it can prove time consuming to locate relevant notes.  To ascertain whether or not any notes survive for the person you are looking for, you will need to use our Research Service (information and application form attached).  In most cases we can locate the notes within one hour (at a fee of £31), but it may take longer (if you wish us to continue the search please send an additional cheque for £15.50 or £31 as appropriate).
 
As part of this search, we will supply you with copies of any notes we locate in the time available that are over 100 years old.
 
Winterton Hospital patient records are subject to a closure period of one hundred years under Data Protection legislation.  If you think your request will fall into this category, you will need to send us proof (birth/marriage/death certificates) either that:

    you are the patient
    or that the patient is deceased and you are a direct descendant

 
If we locate notes that are less than 100 years old, we will provide you with contact details of the appropriate NHS Trust, so that you can seek permission to have them released to you.
 
 
You may be interested in the following publication which includes a history of the hospital with statistics, plans and photographs:
 
BEHIND THE WALL The Life and Times of Winterton Hospital by Adam Lamb and Jack Turton
 
It can be purchased from this Office at the cost of £5 (includes postage and packaging).
 
Please make your remittance payable to Durham County Council.

Many thanks for your help. I suspect she returned to South Moor to be buried which was where her family lived. I emailed Durham County Records Office on Saturday and had reply this morning (what service!). I can request to view her case notes from the NHS Trust archivist apparently which I have just done and hope to get more information from there.

Many thanks again for your prompt reply
Janet

Did you have any luck with this?  I am trying to find out about my great uncle who died in 1917, and I have been told that the records have a 100 year block on them! 

Hope you can help.

Marian