This. Plus, if you beat the DC by 10 or more, you get a Critical Success or if you fail by 10 or more you get a Critical Failure, regardless of the dice roll.

And for opposed skill checks only the player/NPC taking the action rolls a d20, and that's compared against the opposing skill DC (10 + Skill Bonus). This streamlines play and reduces random variability.

So in the example here, only the rogue would have rolled the natural 1 and added 26 for a 27. The paladin's Perception DC would be 16, so the Rogue beat it by 11 and it'd normally be a Critical Success. But since it was a natural 1, the Critical Success is reduced to a Success. They still succeeded at deception, but not quite as well as they could have.