Hallucinating that there are existing files present for empty project

[anand-presidio]

Which API Provider are you using?

OpenAI Compatible

Which Model are you using?

gpt-4o (Azure OpenAI)

What happened?

I asked HAI to create a sample Django app while I had an empty folder open. It searched for relevant files in the directory and displayed files that didn’t exist. After realizing they weren’t present, it proceeded to create the missing files.

Steps to reproduce

1. Open an empty folder.
2. Ensure that code indexing is enabled (check the initial VS Code notification at the bottom right).
3. Ask HAI to create a sample app.

Relevant API REQUEST output

Error
Error reading file:
File not found: /Users/akarthikeyan/myspace/others/cline-test-hello/health_app/views.py

Additional context

I have attached the following screenshots for your reference:

Also i have attached the task.md file for the reference
task.md