Seems like I hit a well known issue although I couldn't find documentation about it in the FAQ (unfortunately).
It seems that Java does not fully support changing the working directory (AKA system property 'user.dir'). Some functionality, such as new File(relativePath) will not be affected by a change of 'user.dir' system property and instead, the file path would be constructed out of the actual working directory that the JVM started from. However, when using the Daemon, I cannot specify the directory from where to perform the execution of the JVM... what am I missing? thanks, GBa.