How did you provide the directory name? I have tried the following from my HOME 
directory:
1. gnome-terminal --working-directory=/home/xxx/Projects/
2. gnome-terminal --working-directory=./Projects/
3. gnome-terminal --working-directory=Projects/
4. gnome-terminal --working-directory=Projects
5. gnome-terminal --working-directory=~/Projects/

In 1-4, gnome terminal is opened with Projects as its working directory, so it 
is working as expected, however in 5. terminal is opened with HOME as working 
directory. Do you see similar behavior?
I am also using the same version of Ubuntu and terminal.

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Ubuntu Bug Squad volunteer triager
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** Changed in: gnome-terminal (Ubuntu)
       Status: New => Incomplete

** Changed in: gnome-terminal (Ubuntu)
   Importance: Undecided => Low

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https://bugs.launchpad.net/bugs/1005306

Title:
  gnome-terminal always opens in $HOME

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