Dirty ABS sensors. Removed all 4 ABS sensors from car and cleaned on 22nd of November 2012 with Wurth brake cleaner fluid. Driven car every day until today, 6th of January 2013. No more error.
Same issue was discussed here:
http://forums.quattroworld.com/allroad/msgs/65591.phtml.
"I had the same gear recognition code. Appear frequently until I cleaned off the face of all of the ABS sensors. I have not had the 01119 code reappear in over 18 months now."