A <---> B <---> C
A and B are 1 mile apart. B and C are 1 mile apart. B can see what both A and C say, but A can't see what C says to B and hence will see out-of-context messages from B.
It looks like Kiwichat attempts to solve this by having dedicated chatrooms rather than just phasing people in and out of visibility to each other based exclusively on proximity, though I'm curious what happens when you physically leave the coverage area for a chatroom.