During the Second World War, he worked in Army Intelligence (DORCA) at the St Kilda Road Barracks in Melbourne. In 1943, while at the Army Barracks, he collaborated with James McAuley and invented Ern Malley, which aimed to expose the excesses of literary modernism. In "The Ern Malley Affair", Michael Heyward recounts the events of the hoax when Stewart conspired with friend and fellow poet James McAuley to dupe Max Harris, the young leader of the modernist movement, and his fellow Angry Penguins, into believing that Ern's sister, Ethel, had found an unpublished manuscript while sorting through her brother's personal belongings after his premature death at the age of twenty-five from the usually non-fatal hyperthyroid condition known as Graves' disease.