Kate asks Merton if he's accusing her of telling Lord Mark about their engagement. Merton says he's doing nothing of the sort, only that he's tormented by not knowing how Lord Mark could have figured it out.
He also finds out that the reason Lord Mark was with Maud that morning at Sir Luke's was because he is staying at her place. It turns out that Lord Mark had an opportunity to make a good bit of money renting out his apartment for the holidays, so he's gone to live at Maud's place for the time being.
Kate says that plain and simple, Lord Mark must have figured out their relationship when Kate denied his advances. But that's all it was, Kate says, just an assumption. That, of course, makes it extra spiteful for the guy to have visited Milly and broken her heart over a mere suspicion. Then again, Kate might be lying.
When Lord Mark returned from Venice, however, he told Aunt Maud he was convinced that Milly and Merton were truly in love.
At this point, Merton asks Kate if he can help her with her father in any way. Kate says yes, by not letting her father know he has come, since her father doesn't approve of Merton.
Merton lifts out Milly's letter and holds it toward Kate. He wants her to open it. The letter was posted to arrive at Merton's place on Christmas Eve.
Kate says she won't be the one to open the letter. She seems to have an idea of what it says: the letter has been sent to inform Merton that Milly has left him a ton of money in her will.
After some convincing, Kate takes the letter from him. She opens it, reads it, and then puts it in the fireplace. As the chapter closes, she tells him that Kate has left him "all […] from New York." We don't know the exact amount of money, but it's probably huge, since Milly doesn't have any living relatives.
Remember when we said that information would be important?