The directory is at args[0], not args[1]. Introduced in commit v2.6.0~489 (... 5889 ... tests are not found in some cases when using add_subdirectory ..., 2008-01-18).
@@ -176,7 +176,7 @@ bool cmCTestAddSubdirectoryCommand
cmSystemTools::ChangeDirectory(cwd);
std::string fname = cwd;
fname += "/";
- fname += args[1];
+ fname += args[0];
if ( !cmSystemTools::FileExists(fname.c_str()) )
{