Unfortunately I don't think there are any legal absolutes in this matter. It's a matter of company policy. Having said that, does the company have an HR department? If so, they are the people your friend should contact and whom she can ask to contact her if she really cannot face her boss, and she can tell them this when she speaks to them. She's likely to get more sympathy than from her immediate boss by the sound of things. Furthermore, in the latter instance, this could be construed as harassment by the boss.
This happened to my bloke last year and I'm sorry to say there was very little support here on AB. Most suggested it was his own fault, that he should quit whining and be grateful to have a job. It's not helpful at all and clearly such people have never been there.
However, he did approach his HR department and subsequently occupational health, and they've both been extremely helpful, as has our GP. He's also been redeployed and his new boss is now in the position, by coincidence, of investigating certain aspects of his old boss. It seems other people have had similar complaints and HR were prompted to do something about it.
I wouldn't advise your friend to hand in her notice just yet. In the current climate it might be difficult for her to get another job. She should stay on the sick until she feels she can go back because at least then she's still being paid. Only if then, if she really can't face it, should she quit. Tell her to take the money for as long as she can and to forget work for the time being (except maybe for checking in with HR as above). It's really just not worth the nervous breakdown in the long term.