"cmd | cat > file" does not create 'file' before running 'cmd'

[Alexis Huxley]

Configuration Information [Automatically generated, do not change]:
Machine: i386
OS: linux-gnu
Compiler: gcc
Compilation CFLAGS:  -DPROGRAM='bash' -DCONF_HOSTTYPE='i386' 
-DCONF_OSTYPE='linux-gnu' -DCONF_MACHTYPE='i386-pc-linux-gnu' 
-DCONF_VENDOR='pc' -DSHELL -DHAVE_CONFIG_H  -I.  
-I/home/packages/bash/bash-2.05b -I/home/packages/bash/bash-2.05b/include 
-I/home/packages/bash/bash-2.05b/lib  -g -O2
uname output: Linux dione 2.4.16 #1 Sat Mar 9 19:04:14 CET 2002 i686 unknown 
unknown GNU/Linux
Machine Type: i386-pc-linux-gnu

Bash Version: 2.05b
Patch Level: 0
Release Status: release

Description:
        File created by stdout redirection not created before
        command execution if command uses pipe.

Repeat-By:
        rm -f fred
        ls fred > fred
        cat fred

        This gives expected result:

        fred

        However, adding a pipe to the command like this:

        rm -f fred
        ls fred | cat > fred
        cat fred

        gives an unexpected failure:

        ls: fred: No such file or directory

        Surely the output file should *still* be created
        before the command runs, and so the 'ls' should
        find it when it is executed, and so there should
        not be an error?

Alexis