It's been a long time since I used WB1.2 or 1.3 and I don't remember if these came with or required the SetPatch command or not.
It's sounds like Setpatch isn't anywhere on your Workbench disks, so perhaps your setup will run fine without it.
What you need to do is to stop the computer trying to run it at startup. To do this you need to use a text editor of some sort (try "Ed" in the "C" directory) and edit your startup-sequence. This file can be found in the S directory of your Hard drive (DH0: or Workbench: or whatever you've called it).
Near or at the top of this file should be a line that looks something like:
C:Setpatch
If you put a semicolon ";" in front of this then AmigaDOS will not try and run this line. It should now look like this:
;C:Setpatch
Save the file and try booting again from HD.
It's possible that the Setpatch command not being present might cause problems further down the line, like I said it's been a while since I used WB1.3.
But hopefully this will help you out.