AN expatriate senior engineer who has worked for the Government for 18 years will have to accept demotion if he accepts an offer to switch to local terms. The Civil Service Branch informed Anthony Pitt-Jones of the Housing Department of the offer verbally about three weeks ago. Mr Pitt-Jones, whose expatriate contract expired last September, was the subject of a test case when civil service unions threatened to sue the Government over alleged discrimination in its localisation policy. Under the threat of court action, the Government said in July that it would allow expatriates to apply for a switch to local terms. Mr Pitt-Jones submitted his application, and pending a reply, his contract was renewed twice on a short-term basis to March 6. The new policy requires expatriates on contract to demonstrate commitment to the territory by applying to become a British Dependent Territory Citizen (BDTC). Other criteria include service need, performance and physical condition. Mr Pitt-Jones, 49, from Britain, has obtained BDTC status and has said he and his family regard Hong Kong as their home. The offer made to Mr Pitt-Jones would mean that he would lose his housing benefit and would have to move out of government quarters. His salary would be cut from $59,965, depending on which rank he is demoted to. He said all he wanted was a formal offer by the Government so he could plan his future. However, a formal offer is unlikely to be made before April 20, because the new policy allowing expatriates to switch terms was frozen under a private member's bill passed by the Legislative Council last year. And even if Mr Pitt-Jones accepts the demotion, he may again become the subject of a test case - to sue the Government. The president of the Association of Expatriate Civil Servants, Royston Griffey, said Mr Pitt-Jones was among 10 potential test cases the association planned to use in a suit against the Government. This time it would sue the Government for unreasonably rejecting or handling officers' applications for local terms. ''If Mr Pitt-Jones is really demoted by the Government, it is an example of a breach of human rights,'' Mr Griffey said. Since July, there have been 109 applications for a transfer to local terms. Fifteen have been rejected and four approved.