Horace is swamped with work because of the quakes and needs a new assistant to help carry the load. For now, he has a ghost named Tedworth helping, but he's too annoying and Horace wants to get rid of him. Mickey needs to get rid of Tedworth and find a new assistant for Horace.
To get rid of Tedworth, you have to find pieces of his teddy bear in Blot Alley, after finding the pieces, you have the choice to have Barnicle Jones or Clarabelle Cow, as Horace's assistant
To have Clarabelle as Horace's assistant, you need to get Jones's compass from Scurvy Pat by spraying him with paint. (Thining him will force you to quit the mission). Then acquire the compass from Pat, then give it to Horace. To have Jones as Horace's assistant, you need to get his compass by spraying paint at Scurvy Pat, and then give the compass to Jones.