Cannot connect if the database is in another network domain. (4240321)

Cannot connect to database in another domain i.e. when doing schema compare from the Tools menu | Compare | Schema Compare.  

The database can be connected to via Connection Manager, but cannot be connected if the database is in another network domain.

Toad threw the following exception.

Exception: Quest.Shared.MSSQL.SqlConnectionException

Message : A network-related or instance-specific error occurred while establishing a connection to SQL Server. The server was not found or was not accessible. Verify that the instance name is correct and that SQL Server is configured to allow remote connections. (provider: SQL Network Interfaces, error: 26 - Error Locating Server/Instance Specified)