You can pick this side-quest up from Tommy in Oakfield who is standing around outside the Temple of Light. After talking with Tommy, head to Echo Cave. This cave can be located just inside the entrance to Oakfield when arriving from Rookridge Road.
Upon entering the area, you will see a counter will appear in the bottom right corner of the screen indicating 15 hobbes on it. That number indicates the inhabitants of the cave that we need to kill. Work your way through the cave and when you reach the first large room, kill any hobbes in the area and then look along the right hand wall for a silver key . Continue into the cave killing all the hobbes as you go. When you have reduced the number of hobbes to zero, make your way to the very back of the cave.
You will be told to now kill the hobbe leader, who can be found on a wooden bridge leading to the chest at the innermost part of the cave (although sometimes he will come to greet you sooner). He is a magic user with a little extra armour than the standard hobbe, but really should cause you no real concerns. Once he is dead, loot the chest across the bridge at the very back of the cave and then return to the entrance.
When you arrive at the entrance Tommy will then attack you. Take him down and then head outside to finish the quest.