She made a mayday call and the Westpac rescue helicopter from Wellington was able to winch Mr Gallagher from the water and into the aircraft. But he could not be revived.
His wife, Sue, from whom he had recently separated, said last night that he was a very keen yachtsman. "I mean, that was his life."
They were married for 30 years and have two sons and two daughters aged from 18 to 24.
Mrs Gallagher said the family would often sail together as the children were growing up.
Mr Gallagher, who had been working as a crane driver in Blenheim, had competed in numerous sailing events around New Zealand.
Police said he was wearing full wet-weather gear - but not a lifejacket - when he went overboard about 2pm near Cape Jackson.
Yachtsman Frank Carter, a friend, said Mr Gallagher first sailed on his beloved Mrs Jones - an 11m Elliott racing yacht - about five years ago.
"He got really quite competitive. He had a boat built for racing. That's the boat he's come to grief on."
Mr Carter said members of the Nelson sailing community were shocked by their friend's death.
"Charlie's quite a careful man when it comes to sailing."
He had been sailing for about 25 years and was familiar with the Marlborough Sounds.
It must have been quite a big wave to wash him over the side, Mr Carter said.
Mr Gallagher's love of sailing meant his family had also spent plenty of time on the water. "He was a home dad for a long time. When he wasn't racing he was cruising. He used to take the boys across the [Abel Tasman National] Park on his boat."
Mr Carter was unsure why Mr Gallagher was not wearing his lifejacket.
"In a lot of cases, when you're sailing, you're harnessed on to the boat with a lifeline around your waist.
"The lifejacket is a bit of a hindrance sometimes, so you take your jacket off so you can get around with your line on ... [because] you're already attached to the boat."
Nelson Harbour tug master Kevin Skelton said he regularly competed against Mr Gallagher on the water.
"He was a good adversary. He was well known in yachting circles."
Mr Gallagher was with his flatmate on his boat when he went overboard, Mr Skelton said.
"It was just a routine weekend delivery."
"He was certainly a good club member and a lot of fun, and we raced against him a lot in the last seven years. He was a good hard competitor and good guy."
Mr Carter and Mr Skelton said Mr Gallagher had competed in many races around the Nelson, Wellington and Bay of Islands areas. He had also sailed from Nelson to Vanuatu.
Police said Mr Gallagher's death had been referred to the coroner.
