My ball landed in the "trench area" of a newly planted tree that had one blue stake (but no white chalk around the trench). A dispute arose over the "sunken trench" area that was obviously recently dug up to plant the tree.
I argued that I was entitled to relief because it was a recently planted tree and the trench is part of the "new tree" area (ground under repair). My partners argued that if the new tree did not impede my backswing, no relief, because there was no white chalk outlining the trench.

We will take the dispute to the club pro, but wanted to get some opinions...

Since I don't know what the blue stake is supposed to mean, I don't think that I can give you any answer. The only time I've ever seen blue stakes on a course, they were the 200 yard markers. Unless there is something I'm missing here, under the Rules of Golf you were entitled to no relief even if the tree did interfere with your swing. The only thing in the rules is in regard to staked trees with wires or ropes to the stakes, or if a local rule is temporarily in effect to protect a new planting.

The course probably should have marked the area as ground under repair, but most courses are notoriously delinquent in doing so unless there is a big tournament to be played. Without any such marking, you play the ball as it lies.

I should have posted the update earlier...our Club Pro explained that it was a local rule (it was posted at the starters booth), the blue stakes were meant as indication that the newly planted tress were "ground under repair" and a free drop was the correct action.

I've always thought that when in doubt, it's quite legal to play two balls from the lie in question (one as it lies and one with relief), record the score from each and get a ruling after the game finishes (except in matchplay where it has to be resolved before the next hole).
Going by the last post, it always pays to read the board for local rules before the round.