Thanks so much for reporting this issue, @beithazohar ??
When you say WPML does not recognise HappyFiles folders you mean those folders don’t show up when viewing a secondary language? Or just that those folders are empty?
I am currently working together with Izzi from the WPML team to make HappyFiles 100% WPML compatible. The more details you can provide here (screenshots, screencast, etc.) the faster and better I can help.
One thing to note: HappyFiles is creating its folders using custom taxonomy terms. If you have enabled the WPML settings to translate taxonomies, then WPML will create a new folder for each language. Meaning when you add files to a folder when viewing your site in the main language, those files won’t be categorised when you switch to another language. As the secondary language folders are duplicates created by WPML. Which is not apparent as they have the same name, but they are two different taxonomy terms. If you want your folders files to be the same across languages I recommend to not translate taxonomies via WMPL.