Pip, Bets, Larry and Daisy had misunderstood Ernest "Ern" Goon, Clear-Orf's nephew as their good friend Fatty in one of his disguises. They even called him Fatty and Bets gave him the Christmas present meant for Fatty, a notebook with his name on it. However, when Ern tells all this to Mr. Goon, the policeman suspects that the children are solving another mystery and asks their parents to ban them from solving another mystery. But as Ern asks the children repeatedly of telling him of a mystery, the children make up a fake mystery and tell it to Ern, telling him about kidnappers and robbers on Christmas Hill, hoping that Ern would tell Mr. Goon and that the policeman would try to solve the false mystery. After that they also tell Ern to go to a hill to investigate about some flashing lights[in reality the children had made a plan that Larry and Pip will flash the lights and Fatty will hide himself and give Ern a scare]. Meanwhile, Mr. Goon frightens Ern by threatening him with being hit and takes out all the information about the mystery and himself goes to inspect the hill. But,when Mr. Goon goes out at night, Ern also goes to the hill but accidentally Ern follows the wrong direction and goes missing on the road to "Harry's Folly", but there he hears some mysterious voices, footsteps and lights and tells the Find-Outers about it. The children don't believe him at first, but then decide to investigate. Fatty dresses as Ern for fun and consequently Ern is captured and taken to Harry's Folly. Bets suggests to Fatty that Ern may be there, and Fatty investigates, with Pip and Larry in tow. Ern is there and Fatty asks him to wait until the next morning so that Holland, his gang and Peters the caretaker could be captured. The Inspector listens to Fatty's tale and sends six police cars to Harry's Folly. Ern is bought back safely and promises to tear up the rude poem that Fatty wrote about Mr. Goon, as both Ern and Mr. Goon think that Ern wrote it.
Bets – the youngest of the Five Find-Outers and Dog
Pip – a member of the Five Find-Outers and Dog
Larry – the former chief of the Five Find-Outers and Dog
Daisy – a member of the Five Find-Outers and Dog
Fatty – the chief of the Five Find-Outers and Dog
Buster – a dog owned by Fatty
Mr.Holland – a garage owner who is also a criminal
Mr. Peters – the gatekeeper of "Harry's Folly"
Ern Goon – the nephew of Mr Goon
Mr. Goon – Peterwood's local policeman
Inspector Jenks – a friend of the Five Find-Outers and Dog
Mr and Mrs.Hilton – parents of Pip (Philip Hilton) and Bets (Elizabeth Hilton)