Caroline “Laska” Darnell suffers from depression and has tried to commit suicide before. On her 19th birthday, her first after her father’s death, she downs a bottle of sleeping pills and slits her wrists. This time, when she awakens in the hospital, she’s too exhausted to pretend that she’s all right, and accepts the doctors’ recommendation that she check herself into a psychiatric institute. Before his death, her father made financial arrangements for her to stay at the Retreat; once a workhouse, it was converted into an asylum in the 19th century, abandoned for several years, and has recently been reopened as a more progressive facility for the treatment of mental disorders. When Laska arrives at the Retreat, she meets senior medical officer Dr Elizabeth Bartholomew and a newcomer named Dr John Smith, who is intrigued when Laska, already shaken by her first sight of the Retreat, correctly describes the layout of the manor without ever having set foot in it before. Laska has a recurring dream of running through the grounds of a mansion, pursued by a demonic hound -- and the Retreat matches the building from her dream down to the last detail.
Laska makes a genuine attempt to work with the doctors at the Retreat, mainly because it terrifies her and she wants to get out as soon as possible. Her anti-depressant medication helps to stabilise her moods, and over the next few months, her doctor, Mike Thomson, notes that her condition has improved dramatically. There have been some instances of trespassing recently, mainly local boys stealing apples from the orchard; also, a local villager, Bernard Watson, recently lost his dog Betsy, an Irish wolfhound, while walking her along the footpath near the Retreat’s folly. The dour Dr Oldfield considers these to be examples of shoddy security at the Retreat; he is also unimpressed by the eccentric Dr Smith and his two mature students, Fitz and Trix, who claim to be researching the Retreat’s history. As far as Oldfield is concerned, the Retreat would be run much better under him than under Dr Bartholomew.
Trix finds male nurse James Abel smoking in the garden, and flirts lightly with him, trying to get information about the Retreat. James, who grew up in the area, admits that the Retreat has always had a reputation for being haunted. Back when he was a child and the Retreat was still abandoned, he and his friend Richard visited the grounds with a homemade “ghost detector” they’d made out of an old oscilloscope, and fled in panic when the machine began crackling wildly at them. James recalls seeing a light in the ruins as he fled, but he later decided that it must have been from a wandering security guard. As James speaks to Trix, however, Bernard Watson is walking along the footpath again with his other dog, Marion -- and when he sees a light flickering in the folly, he flees, gripped by an inexplicable sense of terror.
24 December 1903: Dr Thomas Christie has become the governor of Mausolus House following the death of the previous governor, Porter. Christie brings a more progressive attitude to his position than Porter, who believed that the mentally ill should be isolated from polite society and left to fester in their madness. His patients include the delusional but occasionally coherent Mary Jones; Samuel Sands, who claims that his invisible friends warn him when the doctors try to poison his food; Miss Thorne, the daughter of a wealthy benefactor; and Haward, who seems possessed by multiple personalities that are driving him deeper into his madness. The staff includes the young attendant Craig; Charles Torby, a stolid and sensible hard worker; and Fern, a sullen, abusive and violent man who seems to have some hold over the trustees and is thus allowed to retain his position despite Christie’s complaints. Christie suspects that Fern is abusing the patients, but is unaware of just how far this abuse goes, particularly in regards to the female inmates such as Miss Jones.
After supervising a visit between Samuel Sands and his young nephew, Joseph, Christie takes his three wolfhounds -- Lyell, Grant, and Huxley -- out for a walk in the grounds. However, as they near the mausoleum, there is a sudden change in the atmosphere, which even the rational Christie finds suddenly menacing. Grant breaks free and bolts into the bushes by the mausoleum, and the spooked Lyell and Huxley drag Christie away before he can search for his missing dog.
That night, still brooding over his hound’s disappearance, Christie attends the midnight Christmas service at the local church. The sermon is delivered by the Reverend William Macksey, an old friend of Torby’s who is also haunted by feelings of doom and foreboding in regards to Mausolus House. Following the service, Craig arrives in a panic to inform Christie that Samuel Sands is dead. Craig temporarily abandoned his post for an illicit tryst with a local girl, but both he and the girl were spooked by a disturbing presence in the woods; there was a change in the atmosphere, similar to the one Christie experienced near the mausoleum, and Craig and his lover fled upon seeing two glowing eyes staring at them from out of the darkness. When Craig returned to the asylum, he found Sands dead, huddled by the window as if trying to escape -- or as if trying to keep something out.
Present Day: Laska and James are sleeping together; their relationship is strictly forbidden, but James genuinely cares for Laska and is not simply abusing his privileges. After James leaves for the evening, Laska takes her pills and then decides to prove to herself that she can confront her past without a relapse. When she checked into the Retreat, she arranged for her father’s notes and research to be delivered to her; she now dons a silver pendant shaped like a dog’s tooth and begins to read over the notes, which include the diaries of Dr Christie and Reverend Macksey. Laska eventually falls asleep reading the diaries and has a disturbing dream about a ferocious hound -- and when she wakes, she finds that there are grazes like claw marks on her arm, and that she’s somehow lost her pendant.
The next day, James contacts Laska and tells her that Dr Smith wants to speak with her. When she visits the cottage where he and his students are staying, only Fitz is there. As they chat, there is a strange wheezing, groaning sound from the kitchen, and the Doctor and Trix walk in, discussing the “loose end” they’ve been off sorting out. The Doctor greets Laska and inquires about her remarkable familiarity with the Retreat, but she has dismissed this as a coincidence by now and doesn’t really want to discuss it or her dreams, particularly as Dr Smith isn’t her assigned therapist. He accepts this, but asks her to keep an eye out over the next few days; what’s happening at the Retreat might not be terribly important on the cosmic scale of things, but that doesn’t mean that it’s not worth putting right. Disturbed by their strange conversation, Laska returns to her room, but while going through her father’s notes, she catches a glimpse of a hound in the garden, and fears that she’s starting to hallucinate.
Dr Oldfield complains to James about the recent security problems, which he believes are responsible for his patients’ shared delusion that the grounds are being stalked by a monstrous hound. James soon realises that Oldfield is fishing for dirt on Liz, hoping to get her fired so Oldfield can take charge of the Retreat himself. Meanwhile, Laska seeks solitude in the chapel, but Dr Smith follows her there, even though he claims that something about the chapel gives him an eerie feeling. Laska refuses to discuss her treatment or her past with him, and storms out of the chapel, past the two stone sarcophagi in the cellar, and out into the ornamental gardens. There, she catches sight of Liz Bartholomew’s husband, Joe, and one of the nurses, Susannah Harvey, and realises that they’re having an affair. Unsure whether she should tell Liz what she’s seen, Laska returns to her room and runs a bath. She falls asleep in the bath, dreams of the monstrous hound trying to claw its way into her room, and wakes with fresh grazes on her arm.
25 December 1903: The atmosphere at Mausolus House is growing ever more brooding and fretful. Christie tries to question the other patients to find out if they heard anything strange in Sands’ cell, but to no avail. Mary Jones hears strange noises every night, and Haward speaks in multiple voices, one of which promises him peaceful oblivion in death if Haward will sell his soul to it. Haward also claims to have had visions of giant dogs and spiders roaming the halls of Mausolus House. Miss Thorne’s dementia also seems to be worsening; she was sent to the asylum by her father after bearing the gardener’s child, and when Christie questions her, she begins to speak in the voices of her father and her child, who was taken from her at birth; her father calls her a whore, and her child accuses her of abandoning him.
Mary Jones body is then found savagely and brutally beaten to death. Christie naturally assumes that the cruel murder was committed by one of his patients, and decides to investigate personally before fetching the authorities, for fear that the scandal will result in the asylum being closed down. He arranges for her body and Sands’ to be taken to the chapel, and, at Torby’s request, sends him to fetch Reverend Macksey; Christie does not believe in the power of prayer, but concedes that the Reverend’s presence may calm the inmates. What he does not yet know is that it is Fern who killed Mary Jones. After the morning service, Fern spoke with Macksey about arranging Sands’ funeral, but Macksey sensed that Fern was troubled in spirit and tried to assure him that God forgives all sins if approached with an open heart and a sincere desire to repent. However, he received the impression that Fern had already travelled so far down the path of sin that he felt he could never be forgiven, and thus might as well continue to transgress. When Fern returned to Mausolus House and confronted Mary Jones, the patient he had been sexually abusing, he beat her to death in a fit of violent rage. With her death, the evil that has manipulated his recent actions finally possesses him fully.
Present Day: Unable to sleep, Laska leaves her room -- and sees claw marks at the base of the door. Disturbed, she makes her way to the dining room, where Liz is watching a winter storm through the window. Liz, who seems to have taken something of a personal interest in Laska’s case, admits that she’s afraid that the stress of her work is affecting her marriage, but Laska can’t bring herself to confess what she knows about Joe. Liz is then called away to calm down a patient who claims to have seen something with glowing eyes watching her from the grounds. Laska remains in the common room until daybreak, at which point Fitz bursts in, panic-stricken, claiming that Dr Oldfield came in early and found that security guard Mike Farrell has been murdered. Dr Smith examines the body and concludes that he was killed elsewhere and brought inside. Fitz tries to call the police, but the lines are down, presumably because of the storm. Liz sends nurse Tracy Wade out to fetch the police, but once Tracy’s car is out of sight of the Retreat, a mysterious figure forces her off the road, and something claws its way into the car to kill her.
Fearing that events are nearing a climax, Dr Smith questions Laska further. Still unwilling to open up to him, Laska tries changing the subject by telling Dr Smith about her recent dream: she dreamed that she was sleepwalking near the folly, and that she threw away her dog’s-tooth pendant when it began to heat up and burn her skin. When she admits that she really has lost the pendant, Dr Smith suggests that her “dream” may have been an actual memory of a real event. Laska refuses to believe this, but is growing ever more desperate to leave the Retreat, especially when Trix confronts her and threatens to reveal her relationship with James unless she starts to co-operate with the Doctor. Dr Oldfield then contacts Laska, suggesting that he might be open to releasing her early if he were in charge. After some consideration, Laska tells Oldfield about Joe’s affair with Susanna Harvey. Dr Oldfield later confronts Susannah, who is forced to admit that Joe once told her about a scandal in Liz’s past; apparently she was once under suspicion of assisting a patient’s suicide, and she didn’t tell the board when they hired her for this position.
James spots Mike Thomson prowling around the folly, but can’t be sure whether he’s trying to get in or is just ensuring that the folly is securely boarded up. Thomson returns to the Retreat, where he informs Liz that he’s received a call from the police; they’re questioning Tracy Wade and will soon send a squad to the Retreat, and they request that everybody remain in the Retreat to await questioning. Laska approaches Liz, trying to confess what she knows and what she’s done, but is interrupted when Liz learns that a patient, William Butler, has committed suicide. When Liz orders that his body be taken to the chapel, Laska is struck by the similarity between these events and what she’s read in Christie’s and Macksey’s diaries. She thus finally visits Dr Smith and opens up to him, explaining that her father began to take an interest in genealogy after her mother’s death. After his own death, Laska began going through his notes, and she’s found something that may have a bearing on what’s happening now. She turns the diaries over to Dr Smith, who reads through them for himself.
December 1903: Torby and Macksey return to Mausolus House only to find that the attendants have fled and the patients are wandering loose. Haward has been murdered as well, and Christie has locked himself in the chapel and is raving about a terrible evil that has possessed the grounds. Craig, Torby and Macksey convince Christie to let them into the chapel, and find that Christie has doused himself, the bodies of Sands and Mary Jones, and the rest of the chapel with kerosene. They restrain him before he can set it alight, but are then confronted by Fern and a monstrous hound, its eyes glowing and its skin rippling as though alive; it used to be Christie’s wolfhound, Grant, but it has been possessed by some demonic alien force. It attacked Fern outside, passing the infection on to him, and Fern was driven to murder Jones and Haward under the influence of the alien evil.
Fern now locks the chapel doors and sets fire to the oil-soaked rags Christie had set up. The hound prevents the others from interfering as the chapel bursts into flame, but at the last moment, they are saved by the arrival of Joseph Sands, who has returned in response to the news of his uncle’s death. Sands breaks down the chapel door with an axe, which he uses to dispose of the hound when it attacks him. Macksey and Torby restrain Fern while Sands and Craig throw the hound’s body into the flames. Fern rushes to the hound’s side and is consumed by the fire, along with the other bodies Christie had taken to the chapel. With the death of Fern and the hound, Christie regains his sanity, and he joins the others in flight. As they flee from the chapel, Macksey catches a glimpse of the flames twisting into a tunnel of light from which monstrous, demonic forms seem to emerge, but is unsure whether he truly saw this or merely imagined it in the flames.
Firefighters arrive from the village to douse the flames. Fortunately, somebody let many of the patients out of their rooms before the fire began to spread; however, Miss Thorne was not so lucky, and is dying of smoke inhalation. Miss Thorne’s family has been one of Mausolus House’s main benefactors, which is why her father had her locked away here after her tryst with the gardener; however, she knows that he repented of the wrong he had done her before his death, and at her request, Christie helps her to reach the mausoleum, where she passes away next to her father’s tomb.
Present Day: Smith finishes reading the diaries and concludes that events at the Retreat are more advanced than he’d thought. He thus asks Fitz to take Laska back to her home to fetch the rest of her father’s notes, hoping to find another clue to the nature of the evil. On the way out of the Retreat, however, they encounter the demonic hound that Laska and the other patients have glimpsed in the grounds of the Retreat; it is real after all, and it leaps onto the hood of the car and tries to break through the windshield. Fitz crashes through the gates, injuring himself but knocking the hound off the car. Despite her fear, Laska is relieved to learn that she hasn’t just been imagining things. Back at her home, while Fitz tends to his injuries, Laska fetches her father’s genealogy notes -- and is surprised to learn that she is the great-great-granddaughter of Caroline Thorne, Dr Christie’s patient. Meanwhile, Joe Bartholomew arrives at the Retreat to find out what’s keeping Liz, but runs into Susannah Harvey first and convinces her to nip off to a deserted office.
Dr Oldfield confronts Liz and threatens to expose her secret past to the board of trustees, but Dr Smith then arrives and sends Oldfield away so he can speak to Liz alone. Liz is somewhat relieved, until Dr Smith gives her Laska’s diaries, claims that history is repeating itself, and reveals that he’s found evidence of a car crash near the Retreat’s gates. The car itself has been removed, and the continuing absence of the police implies to Dr Smith that Tracy Wade has been killed. Liz, who’d always considered the Doctor eccentric but sane, is caught entirely off guard when he claims to be an alien time traveller who has come to the Retreat to investigate anomalies in the fabric of the Universe.
Fitz and Laska return to the Retreat, but, like Joe, don’t encounter the hound on their way into the Retreat; presumably, it’s only trying to keep people in, not out. The Doctor explains that the Retreat is under attack by the Sholem-Luz, alien creatures capable of creating tunnels through the Time Vortex. They are drawn to the energy of mental anguish, and the atmosphere of dread and paranoia in the Retreat is a part of their natural life cycle. Laska’s dog’s-tooth pendant was probably all that remained of the hound from 1903; when she threw it away near the folly, the seed of Sholem-Luz influence within the pendant was passed on to the next animal it encountered -- Bernard Watson’s missing hound -- and the cycle began again. In 1903, the possessed hound passed its infection on to a human being; bearing this in mind, Mike Thomson’s claim to have spoken to the police is highly suspicious, as is Dr Oldfield’s growing obsession with getting into a position of power and his claim to have “found” Mike Farrell’s body.
Liz is shaken by the Doctor’s bizarre claims, but Laska has decided to trust him. Liz finally tells Laska why she’s taken a personal interest in her case; Liz was her father’s attending physician, and she prescribed him the painkillers which he later used to take his own life. Laska copes well with the revelation, and admits that she knew her father was in great pain towards the end of his life. James then arrives, claiming that the patients are growing restless, and the Doctor advises him to take them all to a place of safety. He and Laska will investigate the folly, while Liz, Fitz and Trix find and isolate Thomson and Oldfield. They find Oldfield working in his office and lock him inside, but, while searching for Thomson, they stumble across Joe and Susannah on the floor together in Liz’s office. Fitz and Trix manage to drag the enraged Liz out of the office and send the humiliated Joe and Susannah to safety in the dining room. They eventually find Thomson staring out of a window in the grounds, and he admits that he’s seen things that have caused him to doubt his own sanity. Trix claims that the police are waiting to question him, tricks him into entering a padded cell, and locks the door behind him.
On their way to the folly, the Doctor explains to Laska that the Sholem-Luz draw their strength from the energy of mental anguish; their influence has been causing the mental turbulence within the Retreat to increase, and presumably drove William Butler to suicide. Their human servant will soon set the Retreat ablaze so the Sholem-Luz can harvest cellular material from the burning bodies and shape a new generation of seeds, which will go on to spread misery and death throughout time and space -- unless the Doctor stops the process here. He and Laska break into the folly, and see a shimmering bead of light hanging in the air; this is the opening to one of the Sholem-Luz’s time tunnels. The hound confronts them as they examine the tunnel opening, and the Doctor advises Laska to concentrate on her happy memories; if the Sholem-Luz feed on anguish and fear, perhaps a calm mental state will confuse them. The Doctor tries to lure the hound away from Laska, but stumbles and falls into the point of light, which swallows him up. Alone and frightened, Laska closes her eyes and concentrates on happy memories of her father, and manages to slip away as the hound lies down and closes its eyes.
Liz, Fitz and Trix return to the dining room, where James tells them that he’s sent the patients to the chapel on Dr Smith’s instructions. When they arrive, however, they find the patients and staff huddled together, and the chapel soaked in gasoline -- and James locks the door, revealing that he is the Sholem-Luz’s human agent. He has disabled the Retreat’s fire alarms and sprinkler systems, and he now tosses his cigarette lighter to the floor, setting the chapel ablaze. A portal opens into the Sholem-Luz’s time tunnels, revealing the alien figures lurking within, but as James tosses Butler’s body into the flames, another portal opens up, revealing the Doctor. The Doctor orders Fitz to repair the sprinklers, and drags James back into the portal with him.
Laska sees the smoke when she returns to the main building, tracks it to its source and breaks open the chapel door with an axe. Some of the patients have been trapped in the spreading fire, but Susannah evacuates the others. Fitz, Laska and Joe set off to repair the sprinkler systems while Liz and Trix release Thomson and Oldfield. The smoke seems to curl into strange shapes in front of Liz and Trix, and another Sholem-Luz portal opens up in front of them, but Trix concentrates on happy memories -- or perhaps just fakes them well -- and she and Liz are able to pass by the portal and free Thomson. Oldfield has already broken open the window of his office and escaped of his own accord. The hound confronts Joe and Fitz as they work on the sprinklers, but Laska holds it at bay by concentrating on her happy memories. Liz, Trix and Thomson return to the chapel to try fighting the fire, which is extinguished when the sprinklers come on. At the last moment, James falls out of a Sholem-Luz portal, unconscious, and the portal closes up behind him -- and the Doctor then emerges from one of the two stone sarcophagi in the cellar, claiming that all the noise woke him up.
After the fire, Oldfield unexpectedly tenders his resignation without explanation; perhaps he too saw things on the night of the fire that caused him to doubt his own sanity. The Doctor later explains to Laska that he found a way to navigate through the time tunnels, and that he removed James from the chapel to deprive the Sholem-Luz of their human agent. James must have been attacked by the hound while smoking out in the garden; he presumably killed Farrell when the guard found him cutting the phone lines, and after killing Tracy Wade he telephoned Thomson, pretending to be a policeman. The Doctor tried to protect James from the Sholem-Luz and his exposure to the Time Winds by lending James some of his own memories, and pushed him out of the tunnels at a point in time at which the danger was over. He then lured the Sholem-Luz back to 1903, where they emerged from the tunnels into the fire consuming Mausolus House and were themselves consumed. There may be more colonies out there, but this one will produce no further seeds of madness. The Doctor himself emerged from the tunnels in 1903 before they collapsed completely, helped Joseph Sands to free the trapped patients before the fire spread, and sent him to the chapel to rescue Christie, Macksey and the others. Rather than live through the entire 20th century for a second time, the Doctor sealed himself in one of the sarcophagi and went into suspended animation, effectively sleeping until it was time for him to emerge. This is why he always felt strange in the chapel; he was reacting to his future self’s hidden presence.
Back in 1903, Christie returns to the ruins of Mausolus House after the fire, and finds a silver dog’s tooth in the remains of the chapel. Believing that this is all that remains of Grant, he decides to have it made into a pendant. In the present day, Laska bids farewell to the Doctor, Fitz and Trix, and leaves the Retreat, knowing that her experiences (and her medication) have helped her to regain her sense of self-esteem and confidence. James, sadly, must remain at the Retreat, this time as a patient, for he now believes himself to be an alien time-traveller named the Doctor who has retired to Earth after decades of travel. Liz initiates divorce proceedings against Joe, who does not contest them; he knows that he’s been behaving recklessly in recent months, but this is because he’s been diagnosed with cancer, and threw away his future happiness in favour of short-term rewards. However, he found a dog’s-tooth medallion in the burnt-out ruins of the chapel after the fire, and has decided to keep it, as it makes him feel strangely better when he wears it...