This is indeed invalid UTF8, I believe; this file seems to be in a local ANSI code page, without indication what that code page is. How was this file created and how was this text added (was it typed? if so in what editor)?
For now, id call this “as designed”, Water side, its doing the bets it can, with the lack of information what encoding this file uses…
problem is, there isn’t one ANSI, theres dozens, depending on your locale ;).
there bets option is to change the file type to UTF-8 in the original editor, which (I assume) understands what ANSI code page the file is supposed to be in.