Your friend is wrong. You are correct.

Thank you.

The NEC allows a sub panel in a separate building with no other common metallic connections to the building with the main panel to use a 3 wire supply - meaning the ground and neutral would be common in the sub panel. It's also a common practice around here to have a main disconnect in the form of a panel on a pole and a 3 wire feed to the disconnect on the house, esentially a sub panel, where the ground and neutral are common.

A sub panel in the same structure is required to have a separate neutral and ground but the rules change in a detatched structure.

I won't debate whether it's a good idea or not but an isolated ground in a sub panel certainly isn't mandated in ALL cases.

UNK

Thanks again.

you must never ever ground a neutral on a sub panel. If you were to lose your neutral due to any reason like a loose connection or a cut cable ,you could wind up returning all of your backfed power on your ground wire which is typicaly smaller than your neutral.A fire sub code official in Nyc was reprimanded for requireing fire alarm installers to bond their neutral on disconnects fed from a sub panel .In a large building with many sub panels fed from a distributuion panel , you could get hundreds of amps returning on your ground wire in a bonded sub panel if there ever was a neutral failure. VERY BAD NO NO

Monkey, it is allowable in one instance to bond the neutral to ground in a detached structure sub-panel.
See Unk's post.

read Unk's post very carefully.

"...sub panel in a separate building with no other common metallic connections to the building with the main panel to use a 3 wire supply..."

The requirement for no other metallic connections is very important. No phone line, cable tv lines, metal water lines. NO connection.
This is to prevent the return of any currents on a secondary ground connection.
If the conenction was made, the return currents would divide based on circuit impedance and a phone line would likely be quickly destroyed.

bill is right per NEC. wouldnt work tho in washington as per see this forum's FAQ's. 4 wires are required as per RCW's. and hence, no main bonding ... so consult your State and or City code to see if the NEC is good to go.