This report describes the development of an implicit, viscous method for the solution of the quasi-three-dimensional flow equations for rotor-stator interaction in transonic turbomachinery. The flow algorithm is described, followed by the implicit time-marching scheme, and the one-equation turbulence model. The algorithm is implemented on an unstructured grid arrangement of locally structured micro-blocks called 'patches.' Solution-dependent adaptation is used to refine the grid in regions containing flow features which require enhanced resolution. An overlapped sliding grid interface is used to transfer flow equation information between the respective blade grids. The resulting computational algorithm has been used to perform a number of validation exercises and has been demonstrated on a modern transonic turbine stage. Where possible, these results are compared with experimental data and show the ability of the method to accurately capture the unsteady flow physics in a robust and computationally efficient manner.