If you want to filter the models by applicationname and the remaining models by surname:
List<Model> newList = list.Where(m => m.application == "applicationname")
.Select(m => new Model {
application = m.application,
users = m.users.Where(u => u.surname == "surname").ToList()
}).ToList();
As you can see, it needs to create new models and user-lists, hence it is not the most efficient way.
If you instead don't want to filter the list of users but filter the models by users with at least one user with a given username, use Any:
List<Model> newList = list
.Where(m => m.application == "applicationname"
&& m.users.Any(u => u.surname == "surname"))
.ToList();