Hazrat Moulana Muhammad Ilyaas (rahmatullahi ‘alaih) once mentioned: We are commanded in the Hadith to have a good opinion of the believers. Rasulullah (sallallahu ‘alaihi wasallam) said:

حسن الظن من حسن العبادة

Having a good opinion of people is an act of ‘ibaadah

We should understand that this Hadith is to be practised in situations where one does not have any business dealings with people. As far as situations where one has business dealings with people, then one will be careful and alert. (In this way, one will not be deceived by people. However, one should refrain from entertaining baseless suspicions about people). (Malfoozaat Hazrat Moulana Muhammad Ilyaas (rahmatullahi ‘alaih) pg. 116)

Source: Ihyaauddeen.co.za