Merton sees Kate and tells her that he wants to meet her alone. Kate says that this wouldn't be the best idea, considering The Plans. Merton then finds out that Aunt Maud also wants him to marry Milly and make her happy before she dies.
Maud and Susan are hanging out in a nearby shop, but Kate suggests that she and Merton start walking toward it in case the two come out.
Kate tells him that there's more he can do to make Maud believe he's not interested in her. He doesn't know what he can do other than straight-up lie, and he doesn't want to be a liar.
Kate says he can put Maud off the scent by gushing about how awesome Milly is. This wouldn't be a lie, since Merton thinks Milly is pretty chill.
Merton then asks Kate why Lord Mark would have come to Venice only to see Milly and not see anyone else or at least take a sweet gondola ride. Kate says that Lord Mark obviously came to make Milly an offer of marriage. She's surprised that Merton hasn't been able to figure this out.
Merton then wonders any self-respecting dude could be such a clown. It's kind of embarrassing to just show up like that, say "Um, wanna get married?" and then head all the way back to London when he gets shot down.
When Merton keeps talking smack about Lord Mark, Kate smiles. In a really serious head-games move, she tells Merton that he actually is in love with Milly, whether he'll admit it or not.
Merton takes this opportunity to tell Kate that she has asked a lot of him and offered nothing in return. He implies that it's her turn to give him something. And by "something" we mean "a little sumpin' sumpin.'" She claims that she's risking everything (including losing him) by pushing him into Milly's arms.
She finally asks him what he wants her to do. He gives her a very clear ultimatum: either she comes to his rented rooms and does The Deed with him as a sign of her commitment, or he abandons her plan of courting Milly.
Kate dodges the ultimatum like a pro. As Maud and Susan come out of a nearby shop, she tells Merton to take his arm out of hers.