Dick Swiveller makes his way home, stumbling from intoxication. He realizes it may have been a mistake to share the secret with Daniel Quilp. He declares himself an unhappy orphan. Quilp appears and offers to be his father. Swiveller accuses him of deceiving him. Quilp denies it. Swiveller asks to be left alone. He is about to assault Quilp when he forgets why he was angry with him, and he takes his hand instead—swearing to be his brother. He tells his woes about Sophia and reveals the secret all over again. Quilp tells him to bring Fred Trent to his house. He is a friend to both of them.

The next morning, a hung-over Swiveller tells Fred what happened. Fred is angry at Swiveller and suspicious of Quilp’s offer to help in the scheme. The dwarf had already visited him to find out his grandfather’s whereabouts. Fred assumes finally that Quilp’s motivation must be revenge against the grandfather—and therefore that makes him an ally. So, despite his previous mistrust, he decides to visit Quilp. He will allow Quilp to help, but he will not allow him to share the profit.

That night, Swiveller and Fred go to Quilp’s house. Quilp seems glad to see them. He reminisces on when he first met Fred Trent. It was three years ago, when the grandfather sent him off to sea. Quilp was amused when Fred returned on the boat he had set sail on, rather than be grateful for the situation and remorseful of his past behavior. Quilp says he always thought it a bad idea when a rich relation casts off one dependent in favor of another. Fred gets impatient with the conversation. Quilp continues, saying the grandfather thought Fred was a scoundrel—though he tried to convince the old man that Fred’s flaws were common faults. Fred is doubtful of that. Quilp says the grandfather was obstinate. Quilp says that he is mentioning this to prove that he was always Fred’s advocate.

Fred respects Quilp’s ability to realize that Swiveller is Fred’s pawn. They play cards. Quilp cheats while keeping an eye on his mother-in-law, making sure she does not partake of the liquor. He finally orders his wife and her mother to go to bed. Swiveller has fallen asleep. Quilp asks Fred if Nell should marry Dick Swiveller. Fred asks Quilp why he wants to help. Quilp admits he wants to help out of retaliation for the old man losing his money. He says he can be a big influence, and he can either work with or against Fred. Fred says he would like him as an ally.

Quilp says that once they find the grandfather and Nell, it will be easy for Fred to entice Nell away—for she believes the grandfather is poor. Swiveller and Fred leave.