Pursuing a second masters in a more established school
Contact the department and ask them directly "How many students who applied to the PhD program and were only accepted into the masters program end up graduating with a PhD?" If this number is very low, I'd advise against this. Some professors will discriminate against masters students when looking for students to do research with, and if this is the culture at UoT, you should know about it going in. The worst outcome is you end up paying for a second masters and leave with two masters degrees in computer science, which will look unusual in job interviews. I know of at least one interviewer at a company who said he automatically views two masters degrees in the same subject (or even a highly related subject) as a big red flag. 

It might be better to enter a PhD program at a different university or get a job. You can always apply to PhD programs next year. I know of several students with less than stellar academic performance who enter good PhD programs with work experience. As someone who has read a fair amount of personal statements before, those who have been in industry for a few years tend to write better ones. They tend to know what they want and are not going into academia just because it is the "next step" without thinking about it.

Computer science has the advantage that often you don't need a university to do your own research. Start doing research in your spare time. If you find a question you are really interested in and have made some progress, contact professors who work in that area at various PhD programs. You have a much better shot of getting into a good PhD program if a professor has notified the admissions committee that they want to work with you.