This error occurs on both Windows and Linux systems.
This issue can occur because of the following:
1) There is a space in the project directory path (for example C:\project\project space\project1)
2) There is a simulation source file that contains a space in the file name (for example project test tb.vhd)
Correcting the path/filename so that there are no spaces allows the simulation to begin.
This issue will be fixed in the 2014.4 release.