Preheat oven to 375 degrees. Rub a baking dish with garlic clove and then with butter.
In a medium saucepan, combine potatoes, milk, water, bay leaf and pinch of salt. Bring to a boil, stir, reduce heat and simmer until potatoes are tender.
Drain the potatoes and layer half of them in the buttered baking dish. Sprinkle on half of the cheese and season with salt, pepper and nutmeg. Spread out remaining potatoes and top with remaining cheese and seasoning. Pour heavy cream over potatoes. Bake for 45 minutes to 1 hour or until golden and bubbly.
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