After snagging and releasing a 250-kilogram blue marlin, Mr Chapman knocked his GoPro camera from the side of his boat into the water.
"He lent over to get that and fell in," Ms Gates said.
"The boat was in gear so it basically kept going without him."
It was initially believed the marlin had dragged the fisherman overboard.
Ms Gates said Mr Chapman grabbed a lure that was in the water and tried to bring the boat towards him "for quite some time" but it was "doing circles around him" and the line eventually snapped.
Local fishermen called for assistance after spotting Mr Chapman's boat, Poppa George, abandoned at 1:30pm.
Ms Gates said her husband, Matthew, was among those who jumped onboard and studied the boat's GPS track to find out where Mr Chapman may have fallen off.
Commander of Exmouth Volunteer Marine Rescue, Rusty Ellis, says the search was "a little frantic there for a while" as the last radio communications with the boat had been made before 9am.
Mr Chapman, believed to be aged in his late 20s, was eventually found and put on a fast boat back to shore suffering from hypothermia and shock.
He spent the night in Exmouth Hospital and was discharged on Wednesday.
Mr Ellis said Mr Chapman was also fortunate the water temperature was around 26 degrees as "the amount of hypothermia that he got wasn't as bad as it could have been".
He said the incident serves as a warning for solo voyagers to reconsider their plans.
"If something like this happens, you have nobody to back you up," he said.
"Most vessels these days are fitted with safety leads to cut the motor should you fall over and they should be attached to your wrist.
"When you're doing things like he is and wrestling big fish, they can be attached to your waist or your ankle or something, so you still have a chance." - NZN
