Hi Glenn Maxwell,
In a Windows Server Failover Cluster, a node in a "Paused" state is essentially in standby mode. It will not accept new roles or host any services while in this state, but existing services will continue to run.
This means that if Node1 is rebooted or shutdown while Node2 is in a "Paused" state, Node2 will not automatically take over the services or roles from Node1. In order for failover to occur, Node2 would need to be in an "Up" state.
So, if you anticipate a need to reboot or shutdown Node1 and want Node2 to automatically take over the services or roles, you will need to bring Node2 back to an "Up" state first.
Note: You can also manually move the roles or services from Node1 to Node2 before rebooting or shutting down Node1, even if Node2 is in a paused state. However, the failover will not happen automatically until Node2 is no longer in a paused state.
Hope this help.