use lib error

Hi folks,

A noobie question here:

I have a plain simple cgi script in a directory configured for 
Modperl::Registry:

--------------------
#!/usr/local/bin/perl
use strict;
use warnings

use lib '../lib';
use MyApp;

print "Content-type: text/html\n\n";
print "hello\n";
---------------------

This script runs correctly under mod_cgi (without mod_perl), implying that 
perl is able to locate MyApp.pm through use lib '../lib';

Now under mod_perl with PerlSwitches -I/Users/mehryar/Sites/lib
the script runs correctly as well - but only if I comment out the
'use lib...' line. Implying again that mod_perl was able to locate MyApp.pm 
through the -I/Users/mehryar/Sites/lib.

But what I don't understand is why it fails if the use lib '../lib'; line
is present in the script?
I get the following error:
Can't locate MyApp.pm:   Permission denied at /Users/mehryar/Sites/cgi/test.cgi
(This is on my Mac mod_perl2.0.10/Apache2.4.23)

Reading the docs on how @INC is modified is getting me nowhere.

cheers,
-Mehryar