The lake you're referring to is Lake Horn.
However, Lake Horn was not a natural lake. The lake was created by the damming of Carling Creek. Carling Creek originated somewhere near the Western Fair Grounds. It flowed through Old East Village, crossed Adelaide between Central and Princess, flowed through northern Woodfield, and finally around Maitland/Central it continued west to the Thames mostly where the CP rail line is now.
Lake Horn was created by damming Carling Creek at what is now Piccadilly Park. The dam was roughly around Richmond Street. The creek then flowed under Richmond and was channeled through a mill race west to the river. The alley and small townhouse complex west of St. George St between Mill St and Ann St still shows evidence of this mill race.
Over the years (1880s onward), Carling Creek was sporadically culverted and was turned into a storm sewer. The mouth of this sewer is still visible north of Blackfriars bridge on the Thames Valley Parkway. Remember last winter where hundreds of Gizzard Shad fish were jumping around under the TVP bridge north of Blackfriars? That's the mouth of Carling Creek.
I do believe this underground river/storm sewer would still pose a large engineering challenge to the proposed Richmond tunnel, though. But to my knowledge there is nothing resembling an underground lake in this area.